Outsmart The Activists!

 

The “activist hedge fund” is a new breed of shareholder that has emerged in the 21st century, leading to increased pressure on corporate executives and boards through the strategy of taking on more debt and paying out more to shareholders. Because these activist shareholders are generally seeing positive returns and institutional investors are following their lead, it’s clear hedge fund activism is here to stay. Rather than resist the activist shareholder, CEOs and boards must adapt to activist interventions and use them to improve their organizations.

In a new article for Harvard Business Review, Jay Lorsch and I explore the hedge fund activism trend and identify six ways to fend off activist challenges drawing from real examples of companies including PepsiCo, Target, Novartis, Whole Foods, and P&G:

1. Have a clear strategic focus and stick to it.
2. Analyze your business as an activist would.
3. Have your external advisers lined up in advance and familiar with your company.
4. Build board chemistry.
5. Perform in the short run against declared goals.
6. Don’t dismiss activist ideas out of hand.

Read the full blog here. Your feedback is welcome.