Shareholder activism: earn the mandate.

An activist campaign often links three propositions: performance is inadequate; a particular transaction or operating change will improve it; and different directors are needed to make it happen. Each proposition requires its own evidence. Agreement with the first does not automatically establish the second or third.

Start by reconstructing the strongest version of the investor’s argument. Identify the specific earnings, cash-flow, capital-allocation or governance gap. Then test the proposed response against credible alternatives, including a materially improved version of the current plan. Finally, assess the capabilities and accountability required to execute the preferred route.

Apply the same discipline to management. A board cannot dismiss a separation proposal because it involves execution risk while treating its own transformation as certain. Nor should an impressive nominee biography substitute for evidence that the proposed board can oversee the decisions this business actually needs.

This changes the tone of engagement. The board can acknowledge an underperforming business, commit to an independent review and still reject an uneconomic break-up. It can support a strategic direction while changing the people or incentives responsible for delivery. Intellectual independence becomes visible through the decisions the board makes.

Total shareholder return is an outcome that deserves attention. It is also the beginning of a diagnostic, rather than a complete explanation. Reconcile the return with operating growth, margins, cash conversion, capital employed, distributions, financing and changes in valuation. Distinguish a sector-wide repricing from a company-specific delivery failure.

Use consistent measurement dates, dividend treatment, currencies and peer definitions. Show several relevant horizons, including the period before the latest strategic reset. A recent recovery can demonstrate progress while a longer history still raises legitimate questions about capital allocation. Neither observation needs to cancel the other.

At business-unit level, test whether reported improvement survives the removal of temporary benefits. Are margins improving because processes changed, or because investment was deferred? Did cash conversion improve through better operations, or a working-capital movement that will reverse? Does the return calculation include the capital consumed by acquisitions? The board needs a bridge from reported progress to repeatable economics.

Source documents: Alkermes investor presentation announcement, 8 June 2023; Sarissa presentation filed with the SEC, June 2023.

The practical output is a short evidence register: the claim, the supporting data, the counter-evidence, the unresolved assumption and the decision it could change. Assign an owner to every material uncertainty. This is more useful than commissioning a larger presentation whose conclusions were decided at the outset.

A sum-of-the-parts valuation can reveal a real problem: the current structure may obscure performance, misallocate capital or prevent businesses from operating at their best. It does not, by itself, establish that a break-up creates value. The attractive multiple belongs to a future standalone business that must be financed, governed and operated.

Build an explicit view of the separation perimeter. Which customers, intellectual property, distribution channels, systems, people and purchasing arrangements are shared? Which costs disappear, which remain with the parent and which must be duplicated? Include tax, pensions, debt allocation, transitional services, dis-synergies and the cost of maintaining continuity. Bring specialist financial, tax and legal advisers into the assumptions that require their judgement.

Challenge the integrated case just as hard. Shared ownership earns its place through advantages that can be evidenced: lower cost, better access to customers, transferable capabilities or superior capital allocation. A collection of management assertions about synergy is insufficient. If the corporate centre cannot demonstrate its contribution, the separation thesis becomes more compelling.

Compare a sale on the same basis. What proceeds would shareholders receive, when, and with what completion risk? What value remains available under a credible standalone plan? What funding and management attention does each route consume? The highest headline number may depend on the most fragile assumptions.

Source documents: Hasbro campaign presentation filed with the SEC, May 2022; Hasbro annual meeting announcement, 8 June 2022.

A shareholder register is a starting point for engagement, not a map of guaranteed support. Establish who holds the economic exposure, who has voting authority and who influences the decision. A portfolio manager’s investment view and a stewardship team’s voting assessment may involve different people and different questions.

Avoid easy categories. Index investors do not automatically support management. An active investor does not automatically support an activist. A previous vote is not a commitment to the next one. Record the concern, the evidence requested, the decision process and the next engagement. Treat uncertain support as uncertain.

Proxy advisers are another audience for the evidence, with their own policies and analysis. Prepare directors to explain the choices, trade-offs and oversight behind the plan. An adviser can help organise the argument; the board must demonstrate that it understands the business well enough to own it.

Keep economic ownership and voting influence distinct when assessing a campaign. Exposure can change, and disclosed positions may not describe every relevant instrument or voting arrangement. Have counsel and the proxy solicitor verify the applicable record-date and solicitation mechanics. Do not build a strategy around an untested assumption that a visible stake equals a fixed block of votes.

Listen for the criticism that survives every meeting. If several investors independently question capital discipline, another explanation of the corporate vision is unlikely to resolve it. The response may need to be a changed investment hurdle, a cancelled project or a different allocation of decision rights. Communications should make the decision understandable.

The pressure of a campaign can distort capital allocation. A buyback, special dividend, asset sale or new strategic investor may be economically attractive. It may also consume resources that the business needs or make a contested governance position harder to explain. Evaluate the commercial merits and the governance effects explicitly.

Ask a simple counterfactual: would we recommend this transaction, on these terms, if the campaign did not exist? If the answer changes, document why. Consider financing costs, dilution, liquidity, alternatives and the rights granted. A capital provider’s reputation cannot substitute for that work.

Source documents: Box statement filed with the SEC, 17 May 2021; Starboard books-and-records demand, 20 May 2021.

Use the same discipline when considering settlement. A board seat, committee role or agreed strategic review changes how decisions will be made. Assess whether the arrangement improves oversight and execution, how conflicts will be managed and what happens when the agreement expires. The value of a settlement lies in the quality of the resulting governance and business plan, as well as the cost and disruption it avoids.

The economic questions travel well across borders: performance, capital allocation, portfolio logic and management accountability. The route through which an investor can force a decision does not. Incorporation, listing, ownership concentration, governing documents and local stakeholder arrangements all affect the choices available.

For US companies within the SEC universal-proxy regime, non-exempt solicitations in contested director elections use cards listing both sides’ nominees. Shareholders can select candidates across the competing slates. The strategic implication is to explain the contribution of each director, alongside the case for the board as a whole. Check the regime’s scope and the relevant company’s election rules before translating that principle into a campaign plan.

Source documents: SEC universal-proxy compliance guide.

A German Aktiengesellschaft has a different allocation of authority. The management board runs the company under its own responsibility; the supervisory board supervises management and cannot simply take over its management functions. The practical engagement map must reflect that distinction, alongside the shareholder structure and any applicable employee representation. A US-style director-election narrative is an incomplete operating model for this setting.

Source documents: German Stock Corporation Act, section 76; German Stock Corporation Act, section 111.

For a cross-border group, develop one economic case and a jurisdiction-specific route to decision. Map which board owns which decision, which shareholder or regulatory approvals matter, and where employment, financing or separation dependencies sit. Ask local counsel to validate the route early. A globally consistent message cannot compensate for an execution plan that ignores a local constraint.

Where an activist calls for a sale, or a bidder enters the situation, distinguish the strategic evaluation from the takeover process. Test the offer against alternatives while specialists manage disclosure, transaction rules, competition and investment-screening requirements where applicable. A proxy contest, a negotiated sale and a public takeover can intersect without becoming the same process.

The campaign has deadlines: nominations, disclosures, meetings, votes and negotiations. The business has a different timetable: customer decisions, operating changes, investment and cash generation. Both require attention. A company that pauses execution to concentrate on the campaign may weaken the very case it needs to make.

Keep a small response team around one evidence base. The chair or appropriate independent director owns board engagement and oversight. Management owns the operating plan. Finance reconciles the economics. Strategy challenges the alternatives. Legal counsel controls the legal process and disclosure requirements, while investor relations and communications coordinate engagement. Specialists should resolve decisions, rather than create competing versions of the story.

Set a compact dashboard around commitments that investors can eventually verify: operating milestones, return on invested capital, cash conversion, allocation of capital and the costs of delivery. Pair lagging financial measures with leading evidence, such as a completed separation design or adoption of a redesigned commercial process. Make the bridge to financial results explicit.

Define the decision that follows a missed milestone. Does investment stop? Does a business enter a sale review? Does accountability change? A plan with targets but no consequence for repeated failure asks shareholders to extend trust without a mechanism for protecting it.

After a vote or settlement, maintain the reporting discipline. Shareholder support buys an opportunity to execute. It does not retire the economic questions that produced the campaign.

Preparation should leave the board with decisions it is willing to own. We would organise the next session around a deliberately demanding set of questions.

Scipio & Partners brings corporate strategy, portfolio and capital allocation, transaction assessment and transformation delivery into this discussion. The purpose is to establish a credible set of choices, substantiate the preferred route and connect board commitments to operating action, working alongside legal and financial advisers.

The strongest position is a board that has tested its own assumptions, changed what needed changing and can explain what happens next. Earn that mandate before someone else defines the choice.