The Securities and Exchange Commission’s (SEC’s) new universal proxy rules took effect for meetings after August 31, 2022
2022 may have been return of normalcy for many of us, but shareholder activists were ready to pick a fight. Over 1,000 investor activist campaigns were launched in the last 12 months, setting a new record that shows no signs of slowing down in 2023. At the heart of this resurgence is the universal proxy card, an SEC rule that forces companies to list activist-nominated directors alongside company-nominated directors on the same proxy card. Public battles just got cheaper and easier for investors with a bone to pick, as companies long thought safe from cantankerous shareholders are too doubling down on their activist preparations.
When was the last time you reviewed your activist vulnerabilities and response plan? Most management teams are cognizant of their stock price performance compared to peers, but understanding your vulnerability to an activist attack is a far more comprehensive effort.
March 2024 Update: Alpha IR recently partnered with the National Association of Corporate Directors (NACD) to present our insights on the investor relations function. We were shocked to learn that only 39% of director attendees indicated that their companies had an activist preparedness plan. It is management’s duty to maintain a knowledge of its activist vulnerabilities, as well as the basis of a preparedness plan and an established committee of internal and external partners like Alpha to quickly engage on any attack. A webcast can be viewed here.
With this resurgence in campaigns well underway, it is imperative that management teams and directors, with the support of external counselors, reflect on and evaluate the five key areas of activism.
At Alpha IR:
- We work with each of our clients to assess and understand where key vulnerabilities lie on an annual basis across each of these forms of activism.
- We regularly engage key shareholders to reinforce those findings and proactively address messaging gaps to improve communication.
- We maintain a quarterly monitoring program to understand activist engagements within the industry and identify unusual13F movements that may warrant further evaluation.
- Most importantly, we update active ‘Break Glass’ plans that delineate key reporting teams and first steps for if, and when, an activist attacks.
We would welcome the opportunity to construct or refresh your activism vulnerability assessment and response plan. Activist attacks can move fast and often don’t allow management teams the luxury of constructing these materials in real time. Having a keen knowledge of where an activist may attack you with a response plan at the ready can be the difference between winning or losing shareholder support and retaining your company’s autonomy.