Acting on Activism and Emerging Governance Trends


Nasdaq SVP Karen Snow spoke with Betsy Atkins, serial entrepreneur, three-time CEO and founder of Baja Corporation, to discuss emerging governance trends in the boardroom including term limits, ESG and evolving activism behavior. Below is a transcript of the conversation, which has been lightly edited for clarity.

Karen Snow:
Welcome to this installment of Nasdaq Amplify. I’m Karen Snow, Head of East Coast Listings at Nasdaq, and today I’m joined by serial entrepreneur, three-time CEO, founder of Baja Corporation, Betsy Atkins. Betsy, thank you for joining us today.
Betsy Atkins:
I’m happy to be with you.
Karen Snow:
Thank you. Given your expertise and vast corporate board experience across multiple industries, can you tell us what some of the new governance trends that you see emerging are?
Betsy Atkins:
There are some amazing new trends, and they all come from Europe, it’s kind of interesting. The whole concept of CSR, corporate social responsibility, started in the UK. FTSE 100 companies had to disclose their CSR score. It’s come over here now and we now know it as ESG: environmental social governance. It first came over under the heading of sustainability, but it’s been expanded for all the different stakeholders. We see ESG, I also see, coming from Europe, term limits.
In the U.S. we don’t have term limits, you’re on the board until you are asked to leave. And probably, term limits are a good thing. Here’s how term limits have worked in Europe, because it’s informative for what we may see here. In the UK, it’s nine years, you’re not independent after your ninth year. In France, it’s 12. In Scandinavia, it’s six. I think we’ll see a term limit arriving here in the next coming two or three years, I think we’ll start to see that.
Karen Snow:
Are there any discussions of, exactly, how long?
Betsy Atkins:
I think people are talking between 10 and 12, and some people are talking about doing two five-year terms or three three-year terms, we’re hearing it spoken about that way, and then there’s tenure and retirement age. So, in the U.S. the average retirement age has gone up from 72 to 75, so that’s kind of different.
Betsy Atkins:
I think that GDPR, data privacy, started, of course, in Europe, and now we see the California Consumer Protection Act going into effect. I think those are the big trends, and the other huge one is activism, that started here and has gone over to Europe.
Karen Snow:
Let’s talk about activism a little bit more. What trends are you seeing this year? Anything companies should be thinking about? More concerned with?
Betsy Atkins:
Yes, actually, there are some changes. Activism continues to increase. Last year, there were 270 activist proxy actions, and over a third went forward, so what we’re seeing is this new group of activists. It used to be sort of the well-defined, well-known people of Carl Icahn and Trian and Elliot, but now we’re seeing this group called Reluctivists or Constructivists.
Betsy Atkins:
For example, a couple of years ago, at United Airlines, there was a company named Altimeter, and they were a big investor in the travel industry. They were a vertical industry, long only specialists. They got frustrated with United Airlines, and for their first time, they did a “reluctivist campaign” and put a proxy forward and had a proxy fight and they compromised and took a couple of new candidates.
We’re seeing more different types of activism and we’re seeing more results where when you look back in time on what’s happened in the last two years, 50% of the campaigns have triggered a change, which is really high. You might think it’s the ones where you get a director in a proxy fight, but they have either a trigger to go private, a division spinoff, a sale of a division and/or new directors.
It’s surprising that there’s a lag that even two years after, when the campaign is done, there is still a follow-on action. If your company gets an activist, there’s a 50% chance some significant change is going to happen in your boardroom or in your company.
Karen Snow:
Do you have any words of advice for a management team as they’re managing? What are some of the flags that you might be a good candidate for activist behavior?
Betsy Atkins:
Look into how you’re doing versus your peers. If you’re in the bottom half, you’re a target, they are going to come after you, and then look at what you can do to sort of immunize yourself. Because activists will come after you, sometimes, for your financial performance, but often the low hanging fruit is your governance. You’ve had the same board colleagues in place for 17 to 25 years, they say that you’re stale, you don’t have any gender or ethnic diversity.
Betsy Atkins:
They’ll go after you if you’re a bad corporate citizen under the environmental social governance umbrella, a #MeToo event. Any of the ESG, environmental or social, those are sort of the Trojan horse in that a lot of the activists are using now, not just pure financial performance.
Karen Snow:
That’s really good advice actually and I think people don’t really think about that enough. You’re always a treasure of information, Betsy. We’re thrilled that you could join us today. Nasdaq followers, Betsy Atkins book “Be Board Ready”, if you haven’t read it, is a must read for anyone thinking of joining a board or putting one together. I’m Karen Snow, signing off from Nasdaq MarketSite. Thanks for joining us.

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