March 19, 2018

Activism: Want a Settlement? It’ll Cost a Comp Committee Seat

This WSJ article says that when it comes to settling with companies, activists don’t just want board seats. They want to make sure they’re represented on key committees – and when they say “key committees,” they usually mean the compensation committee.

When activist shareholders land in a boardroom, they often jockey for the committee seat with the most control over the top brass.

As activists increasingly wrangle with directors over board appointments, the most popular pick is the compensation committee, according to a Wall Street Journal analysis of significant settlements involving companies and activists between 2015 and 2017.

Because pay drives executive behavior, says longtime activist David Batchelder, a compensation committee role “is the only one that really counts.”

The WSJ analyzed 82 activist settlements at companies with $1 billion plus market caps, and found that 51 of them included specific committee assignments. Compensation committee assignments represented more than half of those 51 examples.  Not surprisingly, committees responsible for reviewing strategic alternatives are another sought after committee assignment among activists.

John Jenkins