Preparing the Board for Shareholder Activism

As shareholder activists find new causes and employ new means to influence the American boardroom, directors are called upon to prepare for and respond to possible activist challenges year-round. In order to equip directors with the knowledge and tools they need to address such challenges, this updated installment of the Director Essentials series includes information on the following aspects of shareholder activism:

• Newest trends in activist campaigns, including volume, value, and sectors targeted
• Types of investors and their methods of influence
• Overview of prominent investor activists in today’s market
• Case in point: how an activist campaign might unfold
• The board’s role in preparing for and responding to an activist challenge

How Boards Can Use This Resource 

• Learn how to “think like an activist” in order to anticipate challenges.
• Understand your role as a director in relation to activists.
• Learn about the company characteristics that attract activists and the methods activists use to enforce change.
• Determine your company’s areas of vulnerability to activist challenges and how to correct them.
• Conduct in-boardroom discussions to prepare for activism.
• Create an activist response plan.

1. Understanding Shareholder Activists

Investors and Shareholder Activists

While most equity trading today is automated or passive— based on algorithms or indexes—public company shareholders continue to be active as instigators of change in the companies they own, and, in some cases, more broadly. The methods used to effect this change may range from the “light activism” of a shareholder resolution on a specific governance issue to the “heavy activism” of proxy voting campaigns or tender offers meant to alter board composition. In the first half of 2018 alone 145 such campaigns launched against 136 companies—the highest number of targeted companies ever.