Friday, 12 October 2007

Countering shareholder activism

Hat-tip to the excellent Corporate Governance website, here are 10 Top Tips for companies from the Brunswick Group on how to counter shareholder activist campaigns. I suppose it could be seen as a back-handed compliment that this kind of thing appears. If shareholder activism didn't work I presume they wouldn't bother saying this.

Incidentally, it is notable that union-busters The Burke Group, recently hired by Cable & Wireless to the annoyance of the CWU, specifically refer to union capital strategies as part of the threat from corporate campaigns.

Anyway, here's the Top 10...

1. Articulate operational and financial milestones that Wall Street can use to monitor progress.
2. Provide simple, straightforward disclosure about executive compensation, showing its alignment with operational objectives, financial goals and, ultimately, shareholder interests.
3. Be aware of the impact a company’s corporate governance and labor practices has on reputation.
4. Thoroughly assess your own shareholder base, and study past campaigns of any activist shareholders to learn their allies and their track records.
5. Rethink how you plan to use the Internet to communicate with different segments of your shareholder base in the age of the e-proxy, especially in terms of annual meetings and proxy campaigns.
6. Don't underestimate the importance of regular investor audits to uncover any communications issues or signs of investor uneasiness with management and the company.
7. Don't rely on the "sell-side" to tell your story or provide intelligence on your shareholder base. While they can be helpful, it's investors who own your stock.
8. Don't brush off irate shareholders or automatically turn down any shareholder’s request to meet with board members.
9. Don't fear engaging in dialogue with hedge funds; they have their ear to the ground on Wall Street sentiment and sometimes are long-term holders themselves.
10. Don't underestimate the importance of communicating and engaging such stakeholders as third-party supporters, customers, and employees; their impact on the outcome of a contested proxy vote — and on corporate reputation — are vital.

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