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Note: James Kristie, the author of the commentary below, is a member of the Panel guiding the Forum's program for "Fair Investor Access" addressing corporate responses to activists, and was also a member of the 2010 Program Panel that established standards for related shareholder communications.

 

Source: Directors & Boards eBriefing, January 2014 commentary

Volume 11, Number 1 • January 2014

 

A New Golden Age
For activists, yes — but for directors, too.

By Jim Kristie

“Activist investing has entered a new golden age,” trumpeted Barron’s in its November 30, 2013 issue [click here].

Activists did reap a lot of gold last year, certainly if you count board seats. As reported in the Financial Times in a late-December article titled “Activist Hedge Fund Managers Get Board Welcome” [click here]
, ISS has calculated that 68% of proxy fights for board representatives resulted in success for activists in 2013 — “and that does not include cases where the agitators were invited on to the board before launching a fight.” 

And activists sure reaped a lot of media coverage last year. I have not seen any studies on this, but if some intrepid researcher were to measure column linage devoted to shareholder activists, I would bet 2013 was a banner year for activism as a newsprint-hogging subject.

Two of my touchstones in this regard:

• Again from the FT, a Dec. 12 article that reports that “The heads of some of America’s largest companies are preoccupied by an unusual question: what would Carl Icahn do?”
[click here]

• And the Wall Street Journal, in a Dec. 10 article headlined “Companies, Activists Declare Truce in Boardroom Battles,” states that “Activist investors are increasingly encountering an unusual reception when approaching corporate targets: an open door.”
[click here]

This sounds golden agey to me, at least for the activists and potentially their investors.

But let’s spin this on its head and suggest that we have the makings of a new golden age for board members, too. Smart, savvy and strong directors — the three S’s — will be valued more than ever as they help navigate their companies in an era roiled by investor activism.

To this point, I am reminded of something Jeffrey Sonnenfeld said at a Yale CEO Summit about 10 years ago. (Quick plug: These summits, which Jeff runs as founder of the Yale School of Management Chief Executive Leadership Institute, are one of the most stimulating gatherings of top executives; I have just returned from the most recent summit held last month at New York’s Waldorf-Astoria.) Jeff shared with those of us who participated in that decade-ago summit — many of whom were leaders still working through the devastating dot-com collapse — what he called an old Jewish saying: “I ask not for a lighter burden, I ask for broader shoulders.”

The burden is not going to get lighter for directors in 2014 — activists will see to that. So let’s add a fourth S — broader shoulders — to the qualities that distinguish valued directors. If management and the board have a bevy of 4S directors, great. If not, it better get them, so that the new golden age is enjoyed by all, not just the activists.

As always, I welcome your comments at jkristie@directorsandboards.com.

 

Jim Kristie is the editor and associate publisher of Directors & Boards.


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