Companies Face an Increase in Activist Attacks

In 2023, an increasing number of companies faced attack by activists. The Financial Times has highlighted a few interesting data points on this trend. The first is simply the sheer number of activist campaigns – a total of 252 globally, a new record. Second is the geographical diversity of the campaigns. While corporate activism has traditionally been popular in the United States, the tactic is expanding, with companies in Europe and Asia Pacific experiencing a record number of activist campaigns; 69 and 44, respectively. Also noteworthy is that 40% of the campaigns in 2023 were launched by first-time activists. A sphere traditionally dominated by many of the same players (i.e., large hedge funds), last year saw new and new types of players (e.g., labor unions). 

With the threat of activist attacks increasing and the those initiating the attacks diversifying, what are companies to do?

First, they should identify vulnerabilities, particularly among directors and senior managers. Given that activists often look to replace one or more directors or executives, those with problematic affiliations, embellished resumes, or a history of poor workplace behavior are “easy pickings.” Successful companies know their vulnerabilities before activists point them out. Increasingly and wisely, companies that could make attractive targets for activist campaigns are screening board members and executives throughout the course of their tenure, not just upon appointment.

As activists often nominate themselves or hand-chosen associates to serve on a target company’s board, companies should commission comprehensive background investigations of candidates and entities with which those candidates have been affiliated, looking for integrity problems, conflicts of interest, misrepresentations or misstatements, and other vulnerabilities. Similarly, a company that finds itself in an activist's sights should immediately seek to understand the activist’s objectives, tactics, and record. A company with knowledge of its attacker's modus operandi can more effectively defend itself. 

As corporate activism increases, companies familiar both with their vulnerabilities and those of their opponents will fare best.