How to Respond to Shareholder Activism

Activist shareholders are often seen as villains by managers and boards. Their demands for strategic and organizational shifts-which can feel personal to managers-often challenge the soundness of a company’s strategy. However, leaders who treat activist shareholders solely as a risk or an annoyance are making a mistake. Although they may be aiming to protect their companies, they’re missing out on an opportunity to tap one of the few free resources companies have to bring about value-creating strategic change and build stronger business models. To better respond to-and take advantage of-the campaigns of activists, leaders must learn to think the way they do. Most activists tend to follow a predefined process to identify and engage target companies.