January 25, 2018
A recent trend for investors is to remove a CEO or director of a board using the intelligence and recommendations of activists in order to strengthen their case against the board. The article explains that, “activists generally will utilize against individual directors all current and historical negative press, statistics and data that is publicly available, whether or not it is accurate, comprehensive or fair”, often leading to public smearing of targeted directors. Boards typically accuse activists of thinking in terms of short-term interests. Davis explains that, “if you listen to what both sides are saying in one of these contests, they are saying the same things—‘We want to do what’s in the best long-term interests of shareholders.’ Yet they are diametrically opposed in some cases in terms of what they think that is.” The article states that boards can pre-emptively hire their own advisory firms to consult them on what improvements can be made in order to avoid probes by activists. As a result, Davis predicts that the target companies of 2018 will be smaller and medium-sized, he states “those companies don’t have the ability to attract the same quality directors [as bigger companies]. They may not have access to a qualified but expensive group of advisors. And they may not have had as much training in dry runs, in playing the role of your own activist.” Davis foresees advising an array of Kleinberg Kaplan clients on these matters in 2018.