Activism, Vulnerability & Defense

Activist investors are increasingly taking companies to task on their ESG practices and more. Board composition and governance standards are critical elements to building a defense strategy.

In our extensive work with boards defending against activists, we have gathered insights on how activists analyze and target boards of directors, and how to take steps to reduce director vulnerability in a proxy contest.

Meet the demands of institutional investors

Over the past five years, the largest institutional investors have been increasingly vocal and specific about their expectations of boards and directors. That means companies must assess their board and its directors in terms of performance, background, and governance standards.

Proactively assess skill and risk on your board

Boards must consistently ensure their composition aligns with relevant industry risks and strategic opportunities. As one of the world’s largest investors noted to us, “We always ask, is this board fit for purpose in terms of assessing risk and providing the oversight of the execution of the strategy?” This review must be proactive to find any potential board weaknesses before activists do.

Know who may be targeted by activist investors

How can you flag a risky board member before bringing them on? We use five filters to analyze each incumbent director and identify those most likely to be targeted by an activist investor: value-creation track record at the target company, strategy-linked skills, and competencies, value-creation track record at other companies where a board member, governance standards, and public perception.

Be prepared to stand up under scrutiny

Scrutiny of public company boards from activists, institutional investors, and the media shows no signs of abating. We only work on behalf of corporations and their existing board, helping them adopt a proactive—and objective—analysis of their board to understand where they might be vulnerable, and how they would stand up to an activist-initiated board review. We have supported numerous boards around the world as part of the activism teams, helping ensure boards have the best insights to defend against activist attacks.

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