Strategic Shareholder Management—Directors' Best Answer to Shareholder Activism

• Date: 01 January 2015
• Published date: 01 January 2015
• Author: Katarina Sikavica
• DOI: http://doi.org/10.1002/bl.30006

also IN THIs IssUE

Food For ThoughT .................. 4

oF STewardS and STakeholderS:

geTTing The governmenT ownerShip

QueSTion righT ...................... 6

when we Say ... .................... 7

NUMBER 137, JAN.–FEB. 2015

www.boardleadershipnewsletter.com

(continued on page 2)

Strategic Shareholder

Management—Directors’

Best Answer to Shareholder

Activism

By Katarina Sikavica

Corporations’ legal owners are their shareholders, and shareholders appear to

be wanting to get more involved. In this article, Dr. Katarina Sikavica, Director of

Business Development, CEO and Board Practice at Korn Ferry, Switzerland, and

Researcher in Residence at the University of Zurich, Switzerland, proposes how

boards can make the most of their ownership linkage.

BoaRD lEaDERsHIP

INNOVATIVE APPROACHES TO GOVERNANCE

View this newsletter online at wileyonlinelibrary.com

Board Leadership • DOI: 10.1002/bl.20033 • Jan.-Feb. 2015

Commentators sing it from the same

hymn sheet: Shareholder activism

is on the rise, and more is expected

to come, particularly from institutional

investors (hedge funds, union funds,

and pension funds), who have more

muscle, interest, and expertise to chal-

lenge executives and the board. The

effectiveness of traditional defense

mechanisms such as poison pills, dual-

class shares, and staggered boards is

decreasing and regulatory forces keep

shifting the balance of power toward

shareholders—at the expense of the

directors.

While how the battle is fought

largely depends on the dynamics

between activists and the board,

boards—especially in continental

Europe—still seem to overlook, down-

play, or simply ignore shareholder activ-

ism. Throughout my academic work

and in my role as practitioner, I’ve had

conversations with numerous board

members, executives, corporate secre-

taries, investor relations professionals,

proxy advisory representatives, and

the activist community. The message

is clear: The approach that directors

adopt toward shareholder activism is

not strategic, not proactive, and based

on hastily made ad hoc decisions. Com-

panies consider themselves safe from

activists’ attacks when, in fact, they are

not. What they overlook is that neither

a large blockholder nor good financial

or social performance shields them

from becoming a target. And compa-

nies often misjudge the perils of periph-

eral players who, while small in terms of

shareholdings or assets under manage-

ment, are exceptionally well networked,

knowledgeable, and highly motivated

to realize their goals sometimes up to

February 12, 2015

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EVENTs