Preparing for an Activist Before There Is One
The Deal article, “Preparing for an Activist Before There Is One,” interviewed Russell Reynolds Associates Consultant Jack "Rusty" O'Kelley III about the firm's study, "Clear Eyes Provide Boards with Better Vision." The article is excerpted below.
Boards of directors which suspect that they may become the target of activist investors should review their own strengths and weaknesses to determine which directors may be vulnerable, according to executive search firm Russell Reynolds Associates.
"Activists generally will utilize against individual directors all current and historical negative press, statistics, and data that is publicly available, whether or not it is accurate, comprehensive, or fair," Jack O'Kelley III, the global leader of the board consulting and effectiveness practice at Russell Reynolds, wrote in an Aug. 11 thought leadership paper. "Boards should be ready for this tactic and be ready to take back control of the narrative about the board."
O'Kelley said that activists look at a series of "filters" for each director to focus on an incumbent director the investor may want to target. Each director's skill set and his or her record of value creation are "critical," O'Kelly said. To identify the most likely director(s) to be targeted, Russell Reynolds urges companies to conduct a proactive board and director activism defense review that uses five filters. Source: Russell Reynolds Associates
O'Kelley told The Deal in an interview that a company's board should conduct a review every couple of years and incorporate it as part of a "good governance program." If a company has had challenging performance, however, the board should conduct a review every year.
"The longer they underperform the more likely the activist will get involved," O'Kelley said.
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