Increase in Activist Shareholder Activity Requires Companies to Adopt Campaign Mentality and Response
December 18, 2014
B.R. McConnon III, Chairman & CEO
Shareholder Activist activity is on the rise according to a recent report cited by the New York Times’ DealB%K. Whatever the aim and merits of the activists, boards and management need to be prepared and able to respond on all fronts. Much of this activity comes from unions, environmental groups, and hedge funds. The first two are well schooled in political campaign tactics to accomplish their goals, and the latter is learning fast.
Among the most visible and current such fights is Herbalife and activist Carl Icahn doing battle with Bill Ackman of Pershing Square Capital Management, LP. The consequences are enormous for both sides—billions of dollars at stake and wild swings in the company’s stock price (HLF). The case is complex and the merits of the actors are still much cause for debate. However, it offers one of the most public views into the increasing use of advocacy techniques in activist battles.
Ackman’s approach has included politicking and speech making, earned media, engaging lobbyists on both the regulatory and congressional fronts (helping spark an FTC investigation that is still underway), a dedicated web presence, coalition building with non-traditional allies, and champion development.
Herbalife’s response has included much of the same, and has relied especially on the recruitment of champions via social media and others means from the ranks of its associates and customers. They, in turn, have carried positive messages via paid advertising, the dedicated website, I am Herbalife, and other means.
These are tried-and-true advocacy techniques, and as shareholder activism increases globally, company executives and their boards can be expected to engage in them increasingly.