How Boards Can Avoid a Disruptive Shareholder Activist

Episode Summary

Greg Taxin is no stranger to shareholder activism. He was a co-founder of the proxy advisor Glass Lewis and has participated in over 50 proxy battle scenarios during his career in asset management and investor activism. Now with Spotlight Advisors, Taxin works with both sides to enhance communication and improve the decision-making that surrounds risk and capital allocation.

Avoiding Activist Attention

For any company, an activist campaign can be highly disruptive. Often spanning several months, a proxy battle requires a significant time investment from both management and the board level, not to mention a significant monetary expense. Most companies will end up spending between $4 and 6 million throughout the course of a proxy battle, explains Taxin.

In this episode, Taxin outlines several steps that boards can take to minimize their risk of activist attention. He explains why board composition is at the heart of the problem (and the solution), and how boards must rethink their disclosure around capital allocation, operating strategy, executive compensation alignment, and other areas of activist focus.

One of the ways activists find targets is to look at the peer companies, and they say, ‘Boy, everybody went to the left, and you guys went to the right…’ But companies often decide to take a different path for good reason. The key is to… explain why you’re choosing to do something different than everyone else, why you think it creates value or reduces risk, and why it’s the right path for this company and this set of shareholders.
— Greg Taxin, Managing Director, Spotlight Advisors, LLC

Taxin’s advice provides an excellent roadmap for boards that are looking to identify potential “danger areas” and head off an activist campaign before it begins.

» Don’t miss Greg Taxin in our Investors Board Performance Review. He joins BlackRock and CalSTRS to give feedback on board performance.

The filming of this episode of Inside America’s Boardrooms was made possible by our Knowledge Partners.