Shareholder Activism: How Will You Respond?

by Bob Lamm and Chris Ruggeri for The Wall Street Journal

If it seems like activist investors have had a more visible and powerful presence over the last few years, it’s because they have. Just under three-quarters of public company CFOs say they have experienced some form of shareholder activism—most often in the form of communication with management or the board, and sometimes in the form of proposals that have gone directly to shareholders, according to the results of Deloitte’s first-quarter 2015 CFO Signals™survey of nearly 100 CFOs of large North American companies. Moreover, about half say they have made at least one major business change specifically because of shareholder activism (share repurchases, leadership changes and divestures being the most common).¹

The trend also shows no signs of abating. In the wake of the financial crisis, Dodd-Frank and Say-on-Pay votes, shareholders have become more assertive in expressing what they want from the companies they invest in. And for CFOs, this new dynamic between public companies and shareholders presents an evolution in corporate governance that may need to be addressed.

There are several steps that CFOs can take to prepare their companies to manage increasingly vocal and influential investors. In this excerpt from CFO Insights, Bob Lamm, senior advisor, Center for Corporate Governance, Deloitte LLP, and Chris Ruggeri, principal; U.S. M&A leader, Deloitte Transaction and Business Analytics LLP, discuss how finance chiefs can identify and address company financial issues that could attract activist attention; why a more proactive engagement with the investment community is needed long before an activist campaign begins; and what some of the key components of a playbook are for responding to an activist campaign. Read more here.

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