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What To Do When Activists "Knock"

Practical Tips 

The subject of how to prepare for - and what, exactly to do - if an activist investor knocks on your door - has been a very hot one of late. These days, activists usually cold-call you, which is the most common way to knock on your door these days – or, maybe worse, begin by knocking your company soundly over the Internet, and in the press - with a highly detailed bill of particulars as to exactly how your strategy, your management, your board, and maybe some specific officers and directors too, are falling short in their view.

One concerned Governance Officer asked over the “Society Huddle” if anyone had a sample script for dealing with activist knocks – which generated quite a lively dialogue.

Your editor responded with a link to his own top-ten list of tips from our 2nd Quarter 2003 issue http://www.optimizeronline.com/files/Optimizer-V19N3.pdf (page 3) and there are many more insights, ideas and practical tips in that issue – and, especially, in this issue’s magazine.

But an important part of our response – and one of our best insights, we think – is that the kinds of actions you need to take in response to an activist’s ‘knock’ – are the very same actions you need to take in any crisis – like a product recall, a precipitous managerial or accounting ‘event’ or an environmental disaster, for example.

Accordingly, we think that one of the most important things to do is to assemble a formal crisis-management plan - that lists the names, titles and roles, telephone and cellphone numbers and ALL the contact info for all of the people with a critical need-to-know – and to designate one “captain” whose job it is to see that everyone in the chain does get notified, and told when and where the first “all-hands meeting” will be... asap AND PLEASE TAKE SPECIAL NOTE: IT IS “THE SEASON” TO GET ON THIS RIGHT NOW…AS YOU BEGIN TO GEAR UP FOR YOUR ANNUAL MEETING …BECAUSE MOST OF THE PEOPLE WHO NEED TO BE ON THE CRISISMANAGEMENT LIST ARE ALSO ON THE MASTER LIST FOR THE A-M…. We also pointed out that in any crisis, you will almost certainly need crisis-specific “subject matter expertise” – legal and proxy-fighting advice if an activist calls – but technical, accounting or scientific advice, for example, in other kinds of crisis situations. Such advice needs to be aimed squarely and precisely at the issue(s) at hand. So a pre-scripted kind of thing can cause you to come up way short in your initial responses.

We constantly hark back to the massive B-P oil-spill, where the company’s failure to handle the P-R issues quickly, and in detail – compounded by the series of increasingly grave reassessments of the disaster itself – caused literally billions of dollars to evaporate from the stock price, day after day.

There has also been a lot of talk lately about having “rehearsals” for senior management and the board as a whole on how to
respond to activist approaches…And frankly, we are not big fans of this idea, mainly for fear it will result in responses that sound
pre-canned and not very ‘responsive” at all…or worse, maybe lead to the very disastrous conviction that you have everything

But then we noted a suggestion in Holly Gregory’s blog that Boards should indeed rehearse what to do and say if they are approached by an activist investor…

And that led us to think that the entire top-management team should be part of this rehearsal…and that, for sure, there should be regularly scheduled reviews and updates of the Crisis Management Plan – and the list of the key participants too – sort of like a “fire drill.”

Then we thought back on the many business crises that we ourselves have been through. In our old days of running what was
arguably the largest transfer agency business in the world, dealing with crises – whether at a customer or in our own shop – was a
nearly-weekly occurrence…


  • stay calm: crises – and dealing with them - are a normal and basically inevitable fact of life: Breaking out in a panic is absolutely the worst thing you can do. and those who do not wish you well will, if they sense fear, be twice as likely to go into attack mode.
  • at the same time, resist the natural urge to think, or heaven forbid to convey the thought that the crisis is maybe exaggerated, and that ‘everything will quickly turn out to be rosy’.
  • get out your crisis management plan and start notifying everyone on the list immediately. carefully note where everyone is – and where they will be forthe next few days – and tell them to stand by for news - and for further planning purposes.
  • Designate one person – and maybe a few deputies if the crisis looks to be a big one – to field any and all inquiries from the press and from the investor community.
  • Remind everyone on the master list to refer all inquiries to the official point- person.
  • prepare for your phones to ring off the hook: make sure the point-person has lots of back-up phone capacity…plus the time and staff to get back to all callers promptly, or risk the perception that the crisis is ‘out of control.’
  • You must, of course, address the issue with the press, and probably with key investors as well, many of whom will be calling you – and do so as soon as possible. But the very best policy is simply to say as little as possible until the facts are in.
  • acknowledge that there is an ‘issue’ – and that it is being vigorously and thoroughly investigated – and that as soon as the facts are in, the news, and your response plan will be forthcoming promptly.
  • put all of the above information into a press release, vet it carefully with legal and operational staff – and with the appropriate subject-matter experts - and release it as soon as humanly possible.
  • Do not, ever, try to quantify the damages before all the facts are in. You will blow your credibility and, in the worst-case situations, die the death of a thousand cuts.