A recent article in Institutional Investor reaffirmed what many public companies and those working in the investor and public relations areas already know: Canada has market conditions and a regulatory environment which makes it an attractive market for shareholder activism. Most Canadian activism is “friendly”, however when talks break down the result can be a negatively-charged, very public campaign which can have serious consequences for the reputation of the organization and its leadership.
While the best, and most obvious defense to shareholder activism continues to be financial performance and good governance, a strong, proactive communications program can also discourage activist activity. But more than that, effective preparation can help companies successfully manage through activism when these issues do arise.
Every company’s communication needs are different, however, here are some general principles to maintaining a positive, proactive approach to shareholder communications.
1. Understand who your shareholders are
For regulatory reasons, this is more difficult in Canada. Many companies, especially small and midsize, may not be as aware of who is investing in their organization. Wherever possible, teams must take the time to get to know their shareholder base to gather information on what investors are interested in, looking for, or to identify concerns before they become major issues.
2. Identify weaknesses
It is important to identify the issues within your company that may attract the attention of activists. Are there questions around executive compensation? Capital deployment? Governance? Understanding the potential areas of dissatisfaction will help guide communications activities. In all investor communications activities, clearly identify the value proposition and provide compelling, fact-based explanations for why the company has made one strategic business or financial decision over another.
3. Provide shareholders with information and access
The general principles of communications apply: maintain frequent, transparent and open lines of communication with your stakeholders. This can include phone calls with the C-suite, one-on-one meetings, and participation in select brokers’ conferences and road shows, among other tactics.
A successful defense against activist shareholders requires close collaboration between both public and investor relations teams. Communicating with one voice and shared objectives will ensure all audiences will hear consistent and positive messages. This includes your investors but also your partners, communities in which you operates, government (if applicable) and media.
4. Create an issue/crisis protocol for activist activity
As part of your overall issue and crisis manual (I’m assuming you have one), ensure a communications protocol shareholder activism is included. This will help guide communications activities with a clear plan on how to respond, roles and responsibilities, draft messaging, Q&As and other communications tools and templates to save valuable time and effort if an issue arises. The communications team can also lead scenario planning for potential outcomes of the activism.
5. Attract and retain top talent
Strong investor and public relations talent are crucial to this area of communications. In house IR, and/or outside agency communications support will be working closely with the CEO and CFO (and other members of the leadership team) and thus need to possess strong financial acumen and have a mind for business strategy. Your communications team also needs to have strong, existing relationships with media and influencers that can be engaged for external communications tactics.
In the end, being proactive and prepared are tenets of all great communications initiative. But even the strongest companies may face issues. These tactics may not prevent all activist activity, but they will help protect the company’s reputation in the event of a public campaign by an activist.