Shareholder Activism reset the IR Playbook. Are you ready?
Sipping that first cup of morning Joe, you see it. An open letter to your shareholders. While you were aware of their concerns, you didn’t believe their ownership position, or conviction, could lead to a public plea for change.
Are you ready to handle your activists?
Shareholder activism is on the rise, with more than 250 public campaigns in U.S. markets in 2024. While often seen as disruptive to the company, there is no doubt that it has proven to be an effective way to influence strategic direction, CEO transition, board refreshment and industry consolidation.
While you can never predict when this might happen to you, every IRO should take these steps to get and stay ahead of any activist threats:
Don’t settle with just sell side conversations. Reach out to all long-term investors.
Sure, we all attend industry conferences and hit our favorite non-deal roadshow stops. While it appeases the sell side, it’s not sufficient to fully understand owner perceptions and alignment with corporate vision.
Shareholder outreach should be an intentional, annual effort to dialogue with investors around issues well beyond how many widgets you sell, barrels you produce or quarterly profit margins.
Long-term investors want to understand your strategy and discuss the key drivers behind long-term value creation. These include goals and alignment with NEO compensation, governance, board skillsets and ongoing refreshment. Outreach meetings should include select board members (lead director and compensation chair), legal and investor relations, but exclude the CEO (hard to discuss your own compensation). Key findings will make for better proxy disclosures, educate the board and drive positive change across the enterprise.
Be your own activist to prepare.
Activism preparedness is a healthy process, creating a forum to discuss asset or operational weaknesses, strategic direction, gaps in governance and underperformance metrics relative to peers. Without the stress of an activist at the door, put yourself in the activist mindset to develop a list and a proactive plan to timely address each. Best-in-class IR programs partner with their financial consultants, investment banks and counsel to create, and regularly refresh, the list.
Give your board an active role in activist preparation.
To avoid surprises, ensure your board is both informed and involved. In addition to annual outreach, a subset of the board should be charged with activism preparedness. This group can also serve as an initial point of contact for potential activists, working to address concerns and plan a constructive path forward.
Invite key shareholders into the boardroom. Engage in a discussion around what attracted them to your story, as well as the catalysts that would drive an increase, or decrease, in their ownership position. While always insightful for the board, these dialogues also serve to strengthen buyside alliances that could be useful during a potential contested proxy campaign down the road.
Reset your IR playbook.
A thoughtful and timely response to shareholder issues is imperative-whether behind the scenes, or publicly. Understand IRO, advisor, board and management responsibilities well in advance. Create a framework for an initial response that can be issued within 24 hours, if required. Oftentimes, the effectiveness of a company’s early response to its shareholders can meaningfully influence the direction of the campaign.
So, are you ready?
If you need help taking the first step to update your IR playbook, know that we’ve been in your shoes. We’ve developed solid shareholder outreach campaigns, created actionable defense plans and effectively guided IROs, management teams and boards through these reputational events.
Connect with me and the team on email or LinkedIn to learn more.
