State-owned enterprises in the United States and around the world are increasingly signing comparative agreements to calm shareholder activist campaigns. A new manager`s seats around the table can yield positive results. From time to time, activist designers are generators of good ideas, shareholder returns and perhaps even long-term value. Sometimes the new blood in the meeting room will break old alliances that stifled progress and allow for a new productive consensus. From time to time, filmmakers and activists who have fought for a while find that they behave well personally. Researchers note that comparative agreements generally focus on board revenue, rather than looking at the operational and leadership changes that activists ultimately seek. Research also shows that such settlements have the effect of increasing the number of activist directors and activists and reducing the number of long-time directors. Although directors seem to be the first targets in the line of an activist fire, the CEO is often the real main goal. Companies that face shareholder activism usually see their CEO leave within 18 to 24 months of an activist designer`s entry into the board. For example, an activist fund we recently met triggered the departure of a CEO in 14 of the last 17 campaigns. What is remarkable is that this fund has not always made the CEO an explicit goal during his proxy campaign.
However, the benefits to a business may seem attractive. The most important thing is that a conciliation agreement buys peace for a period of time. A well-negotiated settlement agreement will require the activist to stop campaigning and to stay out of the public for one or two alternate seasons. A transaction contract also allows a company to limit the number of activists who will join the board of directors. The transaction agreement may also allow the company to exchange one or more less desirable candidates from the activist for alternative candidates with higher prospects for positive contributions. In addition to changes in the composition of the Board of Directors, generally follow the CEO`s revenue increase regulations, increases in payments to shareholders and increases in valuations. And contrary to popular belief, researchers find no evidence that the colonies allow activists to appoint directors who are not supported by other shareholders, or that comparisons allow activists to buy enough shares to challenge existing leadership and force a hostile takeover of the target company.