How Boards Can Protect Against Activists

Next Generation BoardsActivism, Vulnerability, and DefenseBoard Effectiveness
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7月 22, 2021
Next Generation BoardsActivism, Vulnerability, and DefenseBoard Effectiveness
Activist investors use many tools to unseat or at least mitigate the power of board members.

The Harvard Law School Forum on Corporate Governance

Clients who are anticipating or early in the process of an activist situation, and a potential proxy contest, often ask us two questions: 

  1. How do you know if an activist is going to seek to expand the board or target specific directors for replacement (and potentially escalate the situation to a proxy contest)?
  2. If an activist chooses a board member replacement strategy, how can you predict which directors an activist may target?

Based on our experience working with corporate boards defending against activists (as well as our broader board search and effectiveness expertise), we have gathered insights regarding how activists analyze and target boards of directors. In response to client requests, we have developed this guide to help our clients proactively think through defensive measures regarding board composition and governance issues. 

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. Boards should be ready for this tactic and be ready to take back control of the narrative about the board. 

Russell Reynolds only works on behalf of corporations and their existing board and management teams. We urge our clients to take a proactive, “clear-eyed” activist view of their board to understand how an activist may attack their board. We have prepared this overview based on our experience and on the insights of several activist defense lawyers, investment bankers, and proxy advisors with whom we have worked. Additionally, we have talked with activist investors who were willing to share their approaches.

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