Since the start of the 21st century, a new breed of shareholder--the activist hedge fund--has frequently played a decisive role in interactions between corporations and markets. The game of these activists
is simple: They buy stocks they view as undervalued and pressure
management to do things they believe will raise the value, such as
giving more cash back to shareholders or shedding divisions that the activists
think are driving down the stock price. With increasing frequency they
get deeply involved in governance--demanding board seats, replacing
CEOs, and advocating specific business strategies. The authors have
identified six ways in which to fend off activist
challenges or use them to improve your organization: (i) Have a clear
strategic focus and stick to it. (2) Analyze your business as an activist
would. (3) Have your external advisers lined up in advance and familiar
with your company. (4) Build board chemistry. (5) Perform in the short
run against declared goals. (6) Don't dismiss activist ideas out of hand.