Normally, when investors don't think a company is well run, they sell its shares and buy something else.

And then there's Carl Icahn, whose instinct when he sees a badly run company is to buy a big position, try to force its management to do whatever it takes to quickly boost the stock price and then sell out.

Back in the 1980s and '90s, Icahn was called a greenmailer, a corporate raider, a vulture capitalist. His targets included Texaco, U.S. Steel, TWA, Pan Am and RJR Nabisco, and while some of his efforts were spectacular failures, enough were successful that he became a billionaire several times over.

Whatever you think of Icahn and other such corporate buccaneers, having a few of them around has helped keep corporate managers and directors on their toes, lest they become the next target. Which is why, in the post-Enron era, Icahn has embarked on a not-wholly-convincing effort to rebrand himself as a "shareholder activist" dedicated to improving corporate governance even as he enhances the efficiency of capital markets.

Now, after raising at least $2 billion for his own "activist" hedge fund and forming alliances with several others, the 69-year-old Icahn is back. He has already humiliated Blockbuster in a proxy fight by knocking its chief executive off the board of directors. He has forced the energy firm Kerr-McGee to curtail exploration and sell its North Sea assets while browbeating Mylan Laboratories into scrubbing its purchase of King Pharmaceuticals. And he has demanded that Siebel Systems distribute its $2 billion stash of cash to shareholders.

Then, last week, Icahn announced that he and his hedge-fund allies had amassed a $2.2 billion stake in Time Warner and wouldn't rest until the media giant had sold off its valuable cable division and spent $20 billion buying back its own shares.

In all of these recent cases, Icahn chose companies that had recently made mistakes or whose stock prices had either declined or languished. But it is also true that, in every case, managers and directors had been actively engaged in trying to put things right, either with new strategies, new management or both. Icahn's arrival on the scene looks more like a story of piling on, or kicking a company when it is down, than it does one of no-nonsense investor exposing inept managers who ignore shareholders and sit on their duffs.

Icahn's basic strategy for these companies is pretty simple -- and simple-minded: Stop investing in new products, new markets or acquisitions, sell off what you can and send as much cash as possible back to shareholders in the form of dividends and stock buybacks.

Now I'm the first to admit that, at a time when cash is piling up in corporate treasuries, there's a real danger that executives will overpay for acquisitions or invest in projects with high risks or low returns. And there are plenty of recent examples to justify skepticism about corporate growth strategies.

But that doesn't appear to be the case with the companies Icahn and his partners have singled out. In fact, all are in better shape than the one Washington area company that Icahn himself now controls and directs, XO Communications of Reston.

Consider, for example, that even after being acquired out of bankruptcy shorn of most of its debt and excess staff, XO continues to lose money -- $78.6 million during the first six months of this year, to be precise. The competitive and regulatory environment has shifted against it, while its share price, which passed $8 in January 2004, closed yesterday at $2.48. And in a recent quarterly filing, XO revealed that it had failed to meet the terms of its loan agreement with its biggest creditor (that would be Icahn) and had retained an investment bank to "explore strategic alternatives" -- all of which sounds suspiciously like a floundering company that doesn't have a clue what to do next.

Over the past five years, Time Warner shareholders have suffered massive reduction in wealth thanks to the disastrous misjudgment of top managers and directors. A new team, with a credible new strategy, is now in place. The worst thing for the company to do would be to bow to the demands of short-term speculators and engage in more of the grand corporate restructuring and financial engineering that got it into trouble in the first place.

Steven Pearlstein will host an online discussion at 11 a.m. today at He can be reached at

Billionaire financier Carl Icahn is known for playing hardball. In this case, he's hit a foul.