(FORTUNE Magazine) – Back in 1995, when I was thinking about starting an investment fund, KPMG Peat Marwick did a study of Icahn Associates' historical investment results. Our compounded annual rate of return was 48%. Since then our returns have been even higher. Several investment bankers have told me that this is one of the best long-term investment track records in the country, but to date I have never felt the need to publicize it or defend my record. However, as the result of the recent article in FORTUNE called "Raiders Reborn," I feel I must speak out. The article is troubling, not only because it misquoted me but because it is completely wrong about the role of the corporate "activist" or "raider" in the 1980s.

A main theme of the article is that "raiders" such as myself "wreaked havoc" and "ravaged" companies in the '80s, mistakenly implying that LBO artists who often overleveraged companies and corporate "raiders" were one and the same. In actuality, American corporations had become complacently mismanaged and inefficient providers of inferior goods and services. The "raiders," or activists, forced lethargic management to reorganize, shed unproductive assets, and build value, which paved the way for the productivity gains in the '90s. Although we acted in our own self-interest, corporate activists clearly improved the productivity of American business, boosting earnings and stock market valuations, which have enriched millions of American households.

Consider that in 1987 I purchased a big block of Texaco stock and helped the company avert bankruptcy by working for days without sleep to broker a settlement with Pennzoil. The result: an increase in shareholder value of several billion dollars. This was shareholder activism at its best, I thought.

Another great opportunity came in the late '80s when the "junk" bond market went into a free fall. As a major bondholder in companies such as Western Union, Trump Taj Mahal, Leaseway, Vail Associates, Southland, and E-2 (Culligan & Samsonite), I helped restore the long-term viability of these companies by reengineering their balance sheets. Eventually most of the bonds paid off in full; many said that was due in large measure to my efforts.

My next big activist role was with RJR Nabisco. So much of the company's value was obscured by the smoke screen of tobacco lawsuits. I jousted with the RJR board for three years, trying to persuade it to separate Nabisco from RJ Reynolds. Finally, in 1998, they were separated, but in the wrong way. So after I continued to pressure the board and ultimately made an offer to acquire the company, Nabisco was finally sold. Again as a result of my activism, shareholder value increased by several billion dollars.

How did all this work wreak havoc? The truth is that in almost every case where I have been involved as an activist--the merger of Marshall Field with Batus, or Tappan with Electrolux of Sweden, or my persuading USX to separate itself from Marathon--shareholders have benefited significantly. An internal study we conducted recently shows that investors who were shareholders in companies at the time of our initial 13D filings obtained investment returns far in excess of broader market average returns. A person who had invested in each company the day of our 13D filing, and sold one year later, would have reaped an average annual return in excess of 39%.

Another mistaken theme of the article is that "raiders" are returning. My success with Nabisco is an isolated example. There is no sign of a broader trend, and for good reason. The "poison pill" has made it prohibitively expensive to be a corporate activist. The "pill," which is euphemistically called a "shareholder protection device," prevents an investor from purchasing more than a certain percentage of the company's stock unless management approves. The pill is actually an insult to shareholder intelligence. All it does is protect shareholders from making a profit, while giving management a shield against those who seek to maximize shareholder value. This is as absurd as not allowing an individual to sell his family estate unless the caretaker approves of the buyer.

The pill makes it almost impossible for a corporate activist to do his work. Since he cannot purchase a large block of stock or even make a tender offer unless management approves, he must resort to a proxy fight--an extremely expensive battle that's difficult to win. Why? In part it's because large institutional investment funds are reluctant to vote against incumbent management, because management designates which fund will manage billions of pension-fund dollars. That's why shareholders should be upset that raiders are not returning.

Today many companies excuse their poor performance by labeling themselves part of the old economy--whatever that means. But the real reason for underperformance is often the underutilization of assets by inept, entrenched management. These companies could do with a good dose of corporate activism, but thanks to the "poison pill" and other deterrents, the activism of the '80s is gone and will not reappear without radical change in corporate governance. Without unfettered shareholder activism I doubt the U.S. will be able to avoid the severe stock market and economic declines that all my instincts warn me are coming. Legislatures should consider shareholder interests when drafting corporate laws and not merely seek to attract more corporations to their states by passing legislation that protects management from their shareholders.

In retrospect, I think I should have done everything in my power to fight the "poison pill" and other deterrents that have been fostered by entrenched managements during the past decade. I would have liked to be the one to lead such a legislative charge, but I am not politically astute. In the final analysis, I'm only a guy who loves investing and has come to fully understand something Paul Newman says in a movie I saw a few years back. Playing the part of a brilliant pool player, Newman describes how he feels when he is at the top of his game by stating, "It's a really great feeling when you're right, and you know you're right...and you make shots that nobody ever made before, and you play the game like nobody ever played it before." Whenever I come across a great investment opportunity and all my instincts tell me I have a winner, I understand again what Newman meant. Playing the game "like nobody ever played it before" is its own reward. But I think the record shows that when I played the game, rather than my "wreaking havoc," shareholders and companies also have benefited.