Board members: Think like an activist investor
The growing drumbeat of investor activism isn’t just a trend; it’s a fundamental change in relationship between shareholders and companies. Furthermore, activist investors are increasingly well-prepared when approaching boards. However, board members shouldn’t wait for activists to make moves. They should prepare themselves by working to clearly understand the value drivers of the business and considering ways to improve those drivers.
What can board members do?
Some steps directors can take to think like an activist include:
- Evaluate vulnerabilities, such as high cash balances, underperforming assets, or conservative dividend policies.
- Monitor market activity for recent changes in shareholder mix, or an increase in activism directed towards peer companies.
- Have a response plan based on an objective understanding of strategic alternatives, the company’s value drivers, and the value of its component parts under various scenarios.