Last week, I had the opportunity to moderate an event on shareholder activism for the Minnesota chapter of the National Association of Corporate Directors. The spectrum of perspectives on our panel made for a great conversation – a chief financial officer and independent director, an investor relations officer, outside counsel who has worked on both the activist and defense side, and a special situations communications / IR consultant who spent many years on “the other side” at a prominent activist.

Here are a few “do’s” & “don’ts” that I gleaned – also see this memo co-authored by Christine O’Brien of Edelman Smithfield, who was part of our NACD panel.

PREPAREDNESS:

DON’T over-rely on stock surveillance tools. Surveillance is a useful input, but it may not detect activists building positions through derivatives that fall below reporting thresholds. The stronger defense is maintaining ongoing dialogue with key stockholders – with IR and governance teams actively listening, identifying concerns, and escalating potential vulnerabilities to management and the board.

DO be prepared – before the call comes. By the time an activist contacts you, they have likely already accumulated a position and spoken with your stockholders. If you are only now identifying your advisors, assigning roles, and developing a response strategy, you are already behind. At a minimum, engage a proxy solicitor on retainer (so they’re on your team before an activist gets to them), and prepare a templated press release you can quickly tailor and issue. The press release should affirm that the company values input from all stockholders – signaling responsiveness while preserving time to assess your options carefully.

RESPONSIVENESS:

DON’T neglect internal and external stakeholders. Your response to an activist must address more than investor communications. Employees, business partners, customers, and other stakeholders are watching – and uncertainty can be damaging. Communicate early, set clear expectations about what the company can and cannot disclose, and ensure all communications are reviewed for consistency. Every employee should know to direct media inquiries to a single designated spokesperson.

DO listen first – then communicate deliberately. If you have the opportunity, consider adopting defensive governance structures proactively, before any threat emerges (often called a “clear day” adoption). But once an activist is at the table, defensiveness is often counterproductive. Listen openly, take their concerns seriously, and work with advisors to craft a response that is measured, consistent with your public messaging, and protective of the company’s long-term position.

DO approach settlements strategically. Settlement is currently the most common resolution to activist campaigns, due to the cost, distraction, and reputational risk of a contested proxy fight. But settling is not inherently the right outcome, and companies shouldn’t jump to accept an activist’s initial terms. Key settlement provisions – including board seat composition, standstill periods, committee assignments, and information rights – are all negotiable. Engage skilled advisors early to understand your leverage and protect the company’s interests throughout the process.

– Liz Dunshee