Tips to Survive and Thrive in an Era of Shareholder Activism

By David Chase Lopes, Managing Director, EMEA, D.F. King

Shareholder activism has become an increasingly common phenomenon. At its best, it can be a meeting of fiercely committed minds identifying a discount in shareholder value at a company and implementing a solution that will create value for all. At its worst, it can damage a businesses’ credibility and destroy shareholder value. Whether a shareholder activist or a Board opposing activism, nobody wants to damage the business being fought over.

And yet, that often happens.

Shareholders can be positive active participants in deciding the future direction of the business they own, but often when there are disagreements, it can get destructive. Sticking to these simple lessons can help avoid the soap opera and ensure the best case is put forward. 

1. Present a united front: It is important to remember that an activist situation can be tense with a lot on the line. Our advice is that before you start to either defend or oppose a position, get your key people in the room and test that everybody is united. Air any disagreements, rigour test your position and make sure that any reservations, second thoughts or nuance around your stance is considered. When events get more pressurised, your team should be strong and speak with one voice. 

1. Get to the point: There is an enormous amount of technical language and complexity surrounding the market and shareholder activism. Sometimes, simple arguments can get lost. If your argument is strong, it should stand up at the simplest level. These pillars should then be built upon and supported with research, insight and data. But the core argument must be clear, specific and rational.

1. Stick to your message: As these conflicts progress, events often shape the narrative. Arguments are made, loudly and in public. Motives suspected. It is easy to lose focus and start fighting a different battle. Stick to the core argument and stayed focussed. 

1. Be responsive: If a claim is made about your motives or your argument, you need to respond and fast. This is not the time for dignified silences, you have to fight every point and counter every argument. Stick to your facts and be strong and responsive. 

1. You are opponents, not enemies: When you get personal, you give away the higher ground. You shift the focus away from your well-reasoned, rational argument into a fuzzy grey area about values and motives, where there are often two sides to the story.

Start with the assumption that everyone wants what is best for the company and that this is a disagreement about strategy. Shareholders want what’s best for their investment, they’re less interested in the drama.