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This recent article from Nasdaq’s Center for Board Excellence discusses the insights provided by a panel of experts on shareholder activism during a recent webcast on post-proxy season trends in activism. Panelists included Avinash Mehrotra, Co-Head of Americas M&A and Global Head of Activism & Raid Defense, Goldman Sachs; Marc Goldstein, Head of U.S. Research, Institutional Shareholder Services (ISS); Lori Keith, Board Member, e.l.f. Beauty, Portfolio Manager & Director of Research, Parnassus Investments; and Gabriella Halasz-Clarke, Head of Governance and Sustainability Solutions, Nasdaq.

One of the topics addressed by the panel was how to navigate common activist demands.  This excerpt from the article summarizes their advice:

To stay ahead of potential interventions, boards should be able to anticipate activist demands and prepare strategic responses. Three common areas of activist focus include:

1. Return of Capital

Activist Demand: Activists may argue that a company is hoarding cash and that the excess should be returned to shareholders via increased dividends or share buyback programs.

Board Strategy: Regularly review cash management strategies to ensure they align with short-term and long-term objectives. Clearly communicate capital allocation rationale to shareholders to preempt misconceptions or activist criticisms.

2. Business Simplification

Activist Demand: Activists may claim that a company with multiple lines of business lacks strategic focus and efficiency. They often push for restructuring or divestiture of non-core assets.

Board Strategy: Thoroughly evaluate business units for strategic fit and performance. Consider divestiture where appropriate to streamline operations and unlock value.

3.  M&A Activity

Activist Demand: Activists scrutinize M&A strategies—especially if execution falters.

Board Strategy: Continuously assess market dynamics to identify opportunities and threats. Articulate to shareholders how M&A aligns with corporate strategy.

The article says that including these topics into the ongoing boardroom dialogue will permit directors to provide swift and strategic responses to activist initiatives that aligned with the board’s long-term vision.

– John Jenkins