Shareholder activism: harder, better, faster, stronger

14 Feb 2023

Today’s activist shareholders come prepared with bold claims and sophisticated communications strategies. Viktor Koleda writes about steps that corporates can take to prepare for potential challenges.

Salesforce CEO, Marc Benioff, with musician Image Source: Kelly Wilkinson/ The Star


Informed perceptions of activist shareholders have moved so far from the notion of ‘barbarians at the gate’ that observers no longer flinch at the sight of activists taking on the likes of Exxon and Disney.

In the round, observers see activists as a healthy corrective mechanism for inefficient markets. When an established activist acquires a stake in a company, its share price tends to respond positively. It’s a sign that something is about to change.

According to Bloomberg, 2022 saw the most activist campaigns launched globally – a whopping 632 since 2017 – with activists drastically increasing activity in European and Asian markets.

As crisis and litigation specialists who work on both sides of activist situations, DRD Partnership has witnessed increasing complexity in the nature of activists’ challenges. So how can corporates and fund managers prepare in case an activist arrives at the door?

Evolving attacks

Activist situations are high stakes environments when it comes to strategic communications – a compelling argument and an advanced engagement strategy are essential prerequisites for the success of either side.

The demands of today’s activists are often non-linear, as they try to force multi-staged programmes of change onto companies to unlock trapped value. As a result, the debate turns into a clash of strategies, philosophies and management styles, as opposed to a contest over a single decision or transaction.

Even more significant is the evolution of communications approaches and infrastructures deployed by the activists. They have moved on from relying on stinging letters à la Daniel Loeb, to sophisticated influencing campaigns supported by teams of consultants. By the time a holding is disclosed, there is often a complex communications strategy in place. Advanced messaging may already have been developed and the pre-briefings of stakeholders, including the media, could already have begun.

As a result, the defending team is by default a step or two behind, which in turn increases the risk that comes with every statement and action, or lack thereof. To catch up, overtake and counteract the savvy activist – if that is the chosen objective – an extremely nuanced approach is required.

Activist situations are high stakes environments when it comes to strategic communications – a compelling argument and an advanced engagement strategy are essential prerequisites for the success of either side.

Viktor Koleda - Associate, DRD Partnership

How to pre-empt and prepare

The first step for a corporate or a fund manager who wants to prepare for potential challenges from shareholders is to look back at their own promises and see how they stack up against the facts. In our experience, these promises can range from the description of the business model in your prospectus to ESG commitments made in the company’s reports. A clear understanding of your commitments and progress against them is a good place to start since that is what defines the management’s ‘track record.’

Secondly, ensure that your plan for growing shareholder value is clearly set out and broken down into specific drivers. This is the management’s primary responsibility to its shareholders, and a laser-like focus on strategy is what they want to see. Conversely, take a sober look at the organisation for signs of what the market will perceive as a distraction. When Salesforce attracted the unwanted activist attention in January 2023, the reports that and Matthew McConaughey get involved in the company’s strategy discussions certainly did not help the CEO’s position.

Finally, just as you should make your vision clear to the shareholders, you should also put in the time to understand them before an activist shows up. How frequently do you speak to your main shareholders? What is the motivation behind their investments? What is important for them? What are their concerns? Are they likely to vote against you? Trying to win over shareholder support without knowing the answer to these questions is like shooting in the dark.

Where things are heading

‘Corporate raiders’ have better reputations than ever before, which gives them a licence to kill. They come armed with social media channels and other digital assets to deliver their messages directly to your shareholders, the market and the media. Looking ahead, it is clear that activists will continue perfecting the art of mobilising support to take advantage of trends like the rising influence of retail investors. Politicised activist campaigns will also continue to gain traction, forcing boards and management to enter uncomfortable and polarising debates.

Winning over the hearts and minds of shareholders is not getting easier.