Activist Insights’ recent publication, “Proxy Fights 2020,” provides a variety of perspectives on avoiding, preparing for, contesting & winning proxy fights in the age of activism. Contributors include law firms, proxy solicitors, investor communications firms and other advisors. Here’s an excerpt with some thoughts from Vinson & Elkins about whether companies should always take the high road when dealing with activist proxy contests:
Should companies take the high road, whatever an activist does?
No. While companies are generally expected to take the high road and to refrain from ad hominem attacks, there are certainly times where it behooves boards to respond aggressively or even to instigate proactive communication to shareholders. For example, companies must develop a plan to respond directly to each of an activist’s criticisms about business performance and the bona fides of board members and management. Oftentimes, such criticisms are meritless and companies should make this clear in a swift, direct, and deliberate fashion.
As another example, certain activists have a tendency to spin false narratives about a board’s willingness to engage with shareholders. Indeed, if there’s a good story for the board to tell about constructive engagement, it is critical for companies to expeditiously and decisively correct groundless activist timelines by pointing to facts to discredit activists and calling them out for being untruthful. If companies do not respond with strength and conviction in such circumstances, they could appear weak in the eyes of shareholders, as well as Institutional Shareholder Services (ISS) and Glass Lewis, whose support will be critical to achieve a successful outcome.
– John Jenkins