The Activist Investor Blog
Are Directors and Executives Really This
November 12, 2013
Sometimes we read stuff about how company leaders think and work, and
even though we think we’ve seen and heard just about everything we
could, it still surprises, amazes, and disappoints us.
latest news entails how companies have lately thought about activist
The New York Times reports, evenly and fairly, on a range of
tactics gleaned from several different companies and their advisors.
language betrays the approach and perspective, though:
activist investors are “a new threat” leading to “paranoia”
companies “calibrate defenses” to “withstand the assault”
communicating with investors becomes a “situation” that “is resolved”
by “defusing tensions”.
article catalogues how companies have prepared for this “situation” -
they “conduct a handful of exercises”:
prepare in advance before activists “even show up”
assemble a team including executives, investment bankers, attorneys,
and PR firms
beef up IR
assess stock price performance, cash balances, and BoD age and
invite an activist investor to speak to the BoD
have investment bankers write a mock letter from an activist investor,
then rehearse responses
... cordial ... to avoid appearing dismissive of ... shareholder
have the BoD Chair, CEO, and CFO meet with investors, instead of just
sell divisions or return capital (buybacks, dividends).
Companies do this because “the level of sophistication of the
activists has increased.” Investors now retain investment banks to
analyze companies and executive search firms to recruit director
candidates, so “the quality of their board candidates is increasing.”
One advisor sums up this program as becoming “white-paper ready”.
list summons a range of reactions, none good:
this isn’t an earthquake or fire, it just takes relating well to a
company’s owners and the CEO’s employer
What does the investment banking/legal/PR team cost?
Are investors simply an ungrateful nuisance that “shows up”?
Does it truly require extra effort from mature, adult businesspeople
to treat investors cordially, such that directors must, insincerely,
avoid appearing dismissive, when they would merely prefer to dismiss?
We’d love to know which activist investor actually met with a company
BoD, and why. What was in it for the investor?
Role play a discussion with an activist investor? Really?
the point, companies these days will sell businesses or pay out cash
to investors to “quell dissent”. Shouldn’t they do this because
investors want it?
investors have become more sophisticated activists because we’ve had
to. We spend this considerable time and money on activism because
companies have failed to respond to more conventional means of
exercising shareholder rights.
beggars belief that directors and executives think that this use of
time and money serves investors well. Instead of staged, pretentious
communications that disguise only contempt for investors, a BoD and
executive can and should do better.
course, the best investor relations is a soaring share price. Not
every company can have that situation every day, so short of that, how
honest director elections
Frequent, substantive, and candid discussion of company results
Sincere inquiry into investor goals and preferences for a business,
and diligent effort to incorporate these preferences and meet these
Real and reasonable executive and director pay-for-performance.
of papering over a companies “vulnerabilities”, we’d love to see BoDs
and executives make a serious effort to meet investor needs, rather
than their own. But, obtuse people fail to see that investors have
become more serious because of corporate failure to work with
investors, and then think that these insincere measures will make a
2008-2010 Michael R. Levin - all rights reserved.