Failing companies used to be the target of activist shareholders. Today, any public company in any industry is a potential target and experts expect the trend to further increase.
"We used to think that the only companies that were targets were companies that were highly dysfunctional, that were very challenged, had numerous board composition issues, had scandals. And today, even a healthy, well-performing company could be an activist target, particularly if the activist sees some opportunity to unlock shareholder value that the company may not be pursuing.” - Gottfried @ Morgan, Lewis & Bockius LLP
The industry is shifting as institutional investors are increasinly willing to support an activst in certain situations and regulators have shown no signs of stopping the trend. That leaves management responsible to defend against such challengers.
Underperformance still is a major factor but CEOs must look beyond the obvious signs. Analytics and tracking of shareholders is becoming ever important in the IR world. They need to pay attention to what kinds of calls their IR teams are getting and keep tabs on any calls for leadership or strategy changes.
It's important to use this data to develop tailored messaging and targeted communications. For example, by providing colour to a companies strategy - what was considered, why they weren't chosen and the final decision is a great approach as it demonstrates to shareholders that a thoughtful decision has been made. It also shifts the dynamics as it requires any activitist to convince everyone that their approach is the right one and that not only the final decision but the decision making process of management was flawed.
At the end of the day, both parties are looking to maximize shareholder value. All companies should faciliate shareholder feedback - especially if one has a well-though-out plan or idea that you would have spent hundreds of thousands on a consultant for. BHRD is just one such company that is aiming to simplify this process by helping companies better manage their shareholder data.
Read the full article from the Washington Business Journal here.
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