Guest: Derek Zaba

Shareholder Activism: Are You Prepared?
Being Proactive is Key

With over $130b of assets under management and a professed goal of creating shareholder value through better run companies, shareholder activists continue to gain momentum by going after publicly traded companies.  The good news is, with a well-documented, continually updated and well-executed plan, CEOs and their leadership teams can protect their companies from getting targeted.

We asked Derek Zaba, co-chair of Shareholder Activism Practice and partner in the law firm of Sidley Austin, for ways to keep the activists at bay. Over the past five years, Sidley Austin has successfully defended companies against some of the most prominent activists in the industry. 

When asked what boards and leaders need to be aware of regarding shareholder activism, Derek says, “The most important thing is to plan early and make sure that you get out ahead of it, before an activist shows up.”

 Four Ways to Plan in Advance. 

  • Have a team of advisors in place who are prepared and can give you direction before, during, and in the wake of activist advances.
  • Make sure your governance documents (specifically your bylaws) are up to date.
  • Activists are up on the latest technologies and how to use them to achieve their goals, you need to be as well.
  • Have a shareholder rights plan in place to limit the voting power of any one individual–in this case, the shareholder activist.

Your initial response is critical.

Regardless of whether or not you have a solid plan in place, if you do get approached by an activist, don’t fuel their agenda by being defensive or abrasive.  There are several ways an activist will make their move, sometimes it’s public, others will approach your corporate leadership team looking for information to advance their cause, and oftentimes it’s a call directly with the CEO. If this happens to you, will you be ready? Ideally, you have prepared a calm and confident response to each of these circumstances.  Be warned, one emotional or overly argumentative response can have long-term negative effects.

In a nutshell, Derek advises, “Realize that activism is really more a question of when than if, and putting time into the preparation and getting out ahead of this is very, very worthwhile.”

To hear everything Derek Zaba had to say on the subject, listen to the whole interview here.

LISTEN HERE

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