We were shareholder activists once. For two years, we conducted an activist campaign at Tejon Ranch, the largest private landowner in California and a publicly traded company. We earned a 13% return — not bad by industry standards — but we failed to change the company much. We wrote about our adventure nearly a year ago in The Atlantic, but as we thought more about our interaction with Tejon Ranch’s managers, we realized there were valuable lessons that we wanted to share with the corporate leaders who are likely to confront the risk of an activist campaign.
What CEOs Get Wrong About Activist Investors
Activists are a source of potential value, albeit a risky one.
May 01, 2018
Summary.
Instead of viewing shareholder activists as meddlesome outsiders, managers should view activists as a source of potential value — albeit one with both great potential risk and cost. One key for managers is to understand where a particular activist might add value, and then focus on those areas. Another is for CEOs not to assume that activists are targeting them personally. If activists can help boost the stock price by working with current management, they are often happy to do so. Finally, managers should be clear and open with activist investors about important strategic initiatives, including selling the company, even though such transparency can feel uncomfortable at times.