Agony Lance: Shareholder activism

We've got a vocal faction making waves and I think they're wrong, but they're powerful. What can you do to shut down (or slow down) shareholder activism?

how to deal with shareholder activismWe've got a vocal faction making waves and I think they're wrong, but they're powerful. What can you do to shut down (or slow down) shareholder activism? – James, Dunedin

There are three approaches here: arriving at a consensus approach, invoking legal threats and leaving the situation. Quite obviously, only one of these is truly effective and the question is how to bring consensus about.

I find the only real way is to get all of the key players in a room, add enough internal people who know the space and are respected and mix in an external face or two to ensure good behaviour.

Break the group into smaller, mixed, groups and bring them though a journey that starts with the future, touches on end user needs (preferably through interviews), mission, vision and values and ends with overarching long and short-term strategy and priorities.

A well-facilitated session will arrive at an answer, but more importantly, consensus around it. I’ve found that all parties have something to learn from others in the room, but that end user experiences have to drive the overall direction. 

Now that invoking option is only really available to the CEO and board, so if you’re more junior, you have to be more subtle. Try to understand the language the key shareholders are speaking and therefore their perspective on things. Now create a document or presentation that speaks to them in their language and shows how their direction is good, but that the consensus direction is better for the company.

The shareholders might think they own the company, and they do, but they do not control the company. That power rests with the board of directors and their obligation is to act in the best interest of the company, not of the shareholders. If they’re not dong so, forget about the lawsuit, unless you are a substantial shareholder yourself, and start looking for a new gig.