Skip to Content

The Case for Activists on Your Board

“Activist investors waged a record number of campaigns against U.S. companies in 2014 and show no signs of letting up in 2015,” according to the Harvard Business Review.

“Among their trophies in 2014 was a complete housecleaning at Darden Restaurants, the largest operator of full-service restaurants in the U.S. When Darden directors backed a spin-off that many owners opposed, Starboard Capital—with the support of many institutional investors—led the ouster of the entire board. Much the same occurred at Canadian Pacific Railway in 2012, when Pershing Square Capital Management acquired control of its board. This is a good time to renew your board before an outside activist tries to change it.”

“We are reminded yet again that the chief executive is no longer the sole leader of the enterprise. In recent years, the competitive fires of capitalism have been pushing directors to the fore as well. If individual directors are not adding real value to the firm’s leadership, especially in the eyes of institutional investors, this is an opportune moment time to recruit directors who will. To that end, dialogue between directors and investors should be part of the equation too, including activists. We are personally familiar with several companies whose boards now routinely vet director candidates with their major shareholders before their names are placed on the proxy. But directors will certainly want to retain final authority, seeking guidance but surrendering nothing.”

“Instead of waiting for an activist to force their agents into a boardroom with the avowed purpose of redirecting strategy — as happened at Darden Restaurants — why not have the board leader, whether chair or lead director, preemptively strike? Spearheading a board’s own renewal calls for more carefully considering who comes on to the board, who remains on the board, and above all how the board is organized and led as an active strategic partner of management.”

Need some convincing? A Harvard Business School study found that activist board members increase the value of the firm. And a PwC survey suggests activist board members are leading the way for many boards today.