I refer not to political leaders. Not, say, to the American president, who in the last several hours set off a firestorm of criticism against him. I refer to corporate leaders, who in the last several years have been under assault as never before in the history of big business.
The attacks against chief executive officers have come from several directions – the press and the people among them. But at the top of the list of aggressors are investor activists. Activists who take aim at the highest levels of corporate leadership and management.
Such attacks are increasing not only in quality – they are notably more effective in the present than in the past – but in quantity. The Wall Street Journal reports that during the first half of this year, activists spent $40 billion targeting 136 companies with market values of more than $500 million. This is by far the most since 2013, when the data was first collected. And, it is up significantly from the same period last year. Moreover we are talking here attacks not only against small companies, with names you’ve never heard of. But attacks against big companies, with household names such as Xerox, Procter & Gamble, and Microsoft.
When activists get into the act, CEOs are, inevitably, without exception, themselves under attack. Their performances are being openly and aggressively questioned. Their professionalism is being obviously and antagonistically judged. Boards become edgy, stockholders become judgmental, the press and the public become aware that blood is being drawn.
What are CEOs to do? How to defend themselves without humiliating themselves? Without permanently, ruinously undermining their reputations? Most of the time the answer has been … compromise. Reaching some sort of settlement in which CEOs give up some of their power and authority in order not to surrender all of their power and authority.
During the first half of this year activists won a record-setting 119 board seats – over 85% of them through settlements. CEOs seem generally to have concluded better to give up part of the loaf than risk the whole of the loaf.