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Corporate governance|How to Respond to Shareholder Activism
Corporate governance

How to Respond to Shareholder Activism

Treat it as an opportunity, not a threat. by Mark DesJardine

From the Magazine (July–August 2024)
Daniel Everett

Summary.   

Activist shareholders are often seen as villains by managers and boards. Their demands for strategic and organizational shifts—which can feel personal to managers—often challenge the soundness of a company’s strategy. However, leaders who treat activist shareholders solely as a risk or an annoyance are making a mistake. Although they may be aiming to protect their companies, they’re missing out on an opportunity to tap one of the few free resources companies have to bring about value‑creating strategic change and build stronger business models. To better respond to—and take advantage of—the campaigns of activists, leaders must learn to think the way they do. Most activists tend to follow a predefined process to identify and engage target companies. This article presents the three main components of the activist playbook—linking performance failures to organizational weaknesses, developing a plan of action, and creating a narrative in support of change—and describes how managers can anticipate and respond to activist campaigns.
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Activist shareholders are often seen as villains by managers and boards. Their demands for strategic and organizational shifts—which can feel personal to managers—often challenge the soundness of a company’s strategy. In 2023, more than 23% of Russell 3000 companies identified shareholder activism as a key risk factor in their annual reports, up from 21% the previous year.

Read more on Corporate governance or related topics Boards, Investment management, Organizational change, Strategy, Operations strategy and Business communication
A version of this article appeared in the July–August 2024 issue of Harvard Business Review.
Read more on Corporate governance or related topics Boards, Investment management, Organizational change, Strategy, Operations strategy and Business communication

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