In light of Donald Trump’s unorthodox campaign and unexpected victory, it may be worthwhile to consider whether there are any strategy lessons for those engaged in shareholder activism. After all, a proxy contest is essentially a form of political campaign.
- Is angry rhetoric on the part of the activist more galvanizing than reasoned argument?
- In any proxy contest, management represents “the establishment” and is more constrained by securities disclosure rules and governance norms. Does this breed an inherent mistrust in management’s response?
- Is management best to respond with reasoned argument or with rhetoric of its own? In other words, does engaging in incendiary rhetoric aid management’s cause or damage its credibility?
- Is it easier for people to romanticize the past than to think clearly about the future? For example, a deposed founder making a comeback tends to focus on the company’s previous track record and a return to past glory.
- Does the desire for change – for its own sake and whatever it may bring – provide the activist with an inherent advantage?
- A shareholder engagement program is critical, but, in light of yet another high-profile polling “miss”, is shareholder feedback reliable?
- Does experience – in the form of director and executive tenure – hurt more than it helps?
- Are shareholders more likely to support a “celebrity” activist?
- Is there a divide between institutional and retail shareholders similar to the divide between urban and rural voters?
- Finally, does having a direct financial stake in the outcome temper the actions of shareholders in a proxy contest as compared to voting citizens in a political election?
It is likely that, in today’s current market environment, the answer to at least some of these questions is “yes”. That’s the easy part. The difficult part is figuring out what to do about it.