Visitation by activist shareholders has to be taken as seriously by today’s CEOs as it was back in the 1980s, during the days of corporate raiders such as Boone Pickens and Carl Icahn—perhaps even more so. The continuing, prolonged period of economic weakness and uncertainty around the world has weakened the results and prospects of many companies, while sweeping changes brought by digital technology, globalization and other trends make them strategically vulnerable.
Meanwhile, investors—even the institutional investors who used to be an incumbent CEO’s best friends—generally are more fickle than ever and thus more willing to give agitated and aggressive fellow shareholders a hearing. And, yes, Carl Icahn is still around—much older, but just as effective. Just ask CEOs who’ve recently been targeted by him, including Apple CEO Tim Cook and Family Dollar CEO Howard Levine.
Right now, Mayer is dealing with Starboard Value LP. The concern about Yahoo by the activist investor group came soon after the spotlight was taken off Darden Restaurants CEO Clarence Otis Jr. He ended up spinning off Red Lobster, overhauling the menu of Olive Garden—and allowing Starboard to take over the company’s board of directors. Starboard has been trying to pressure Yahoo to consider a deal with AOL. And now, at least two top-10 Yahoo shareholders have indicated that they are so unhappy with how Mayer has been failing to turn around Yahoo that they have made a direct plea to AOL CEO Tim Armstrong to explore a merger and run the combined company.
Alaix is dealing with Bill Ackman, head of Pershing Square Capital Management, who lately has greatly influenced strategies and execution at companies including Procter & Gamble, J.C. Penney and Herbalife. Zoetis, the former animal-healthcare arm of Pfizer, has taken a stake in the company—so Alaix can expect Ackman to come calling soon if he hasn’t already.
The success of activism campaigns has more than doubled over the last decade, to more than 70%, according to a recent survey by law firm Schulte Roth & Zabel and the data provider Mergermarket. Virtually all the senior corporate executives surveyed said they believed that activism will rise over the next 12 months, and more than half predicted a “substantial” increase.
These shareholder-agitators also are proving “more willing to broaden their suggestions beyond financial-engineering moves like spin-offs or special dividends,” The New York Times reported.
The newspaper reports that nearly half of respondents to the survey said calls for improved efficiency and resolving operational issues would underpin activist campaigns in the next year. The biggest drivers of campaigns, will remain companies’ stock performance, changes to boards or management teams, and announced acquisitions.
All of this means that the back seat is getting more crowded for CEOs as they pilot their companies. Chiefs should keep their eyes and ears peeled for signs of dissent coming from outside the boardroom or C-suite, and always be prepared to back up their strategy and direction.