corporate change #shareholderactivism
Social media isn’t all grumpy cats and memes. It is being successfully harnessed to garner support for real corporate change. Is it only a matter of time before we seek shareholder activism going viral? Will a board be overthrown by 140 characters or less? #byebyeDirector
While traditional methods are by no means redundant, social media can be just as, if not more effective in enlisting support – whether by the company or shareholder activists.
In the context of corporate governance, social media is presenting both opportunities and risks. Social media is a marketer’s dream, is a great way to build loyalty and confidence and gives company’s invaluable feedback on their reputation and public perception. On the other hand, it can be an easy way for disgruntled shareholders, employees and unsatisfied customers to publically voice their discontent with the company, allows unfavourable information to spread like wild fire and can magnify corporate misconduct. All at the click of a button. #horsehasbolted
Social media for the activist
Social networking sites Facebook and Linkedin, micro-blogs like Twitter and Tumblr and Instagram and You Tube can all used to both unite and create activist shareholders. The platform ultimately chosen will depend on the activist’s objective and whether the approach is proactive or adversarial.
Social media allows individuals and once disconnected shareholders with minimal holdings to communicate with each other and share information on a company’s activities and performance thereby facilitating collective action. At the same time, bigger activist groups can disseminate materials and share their views with larger audiences to rally support.
This might, for example take place in the context of the shareholder activist calling a company meeting to vote out the Board or force other actions not currently supported by management.
Twitter and Carl Ichan
Shareholder activism through social media has so far been rare in Australia however as general activist activity increases this may change.
In the US, well known activist Carl Ichan has used Twitter on multiple occasions to state his case regarding several high profile and high performing companies in which his entity Icahn Enterprises L.P holds shares. Ichan’s notable tweets include:
- in respect of Apple Inc, “We currently have a large position in APPLE. We believe the company to be extremely undervalued. Spoke to Tim Cook today. More to come.”
- in respect of the Canadian oil and gas exploration company Talisman Energy. “…Disclosed approx 61 million share position in Talisman Energy. May have conversations with mgmt re strategic alternatives, board seats, etc.”
- in respect of Dell Inc, “all would be swell at Dell if Michael and the Board bill farewell.”
- in respect of eBay ‘we believe based on evidence we have newly uncovered that Donahoe’s incompetence cost eBay holders over $4 billion.’
While not always successful, Ichan’s activity Twitter has demonstrated how information and opinion can be generated rapidly and disseminated widely, often in less than 140 characters. In the case of Michael Dells’ bid to take Dell private, Ichan was unable to thwart the bid, but did play a positive role for Dell shareholders getting Michael Dell to increase a bid that had been viewed as “best and final”. In the case of eBay Ichan took at stake so that he could agitate for PayPal’s spinoff – a transaction that ultimately proceeded.
As for YouTube, in 2007, Eric Jackson, published an amateur video entitled ‘Plan B’ to enlist the support of 100 investors of Yahoo (both institutional and non-institutional). Jackson, who at the time held only 96 shares in the company, voiced his discontent regarding Yahoo’s strategy and performance and its CEO Terry Semel was ousted as a result.
Consequences and defence tactics
Whether it is a one-off or ongoing campaign, the unpredictable nature of online activist activity means a company’s reputation and value can quickly be displaced. Social media demands accountability from a company and if criticisms of conduct or performance are left unchallenged, speculation will no doubt increase.
Companies can fight back. In 2012 in the US, dietary supplement company Herbalife responded to allegations from billionaire activist investor Bill Ackman that it was ‘the best managed pyramid scheme in the history of the world’ by tweeting that Ackman was the ‘Worst of Wall Street.’ Herbalife also proceeded to register domain names ‘therealbillackman.com’ and ‘billackman.net’ perceivably in response to Ackman’s website ‘factsaboutherbalife.com.’
While the Herbalife example is provocative and not an approach we would recommend without much prior consideration, the big lesson is be ready! Companies should have formal policies in place addressing how they will engage with and update their shareholders using social media but also how they will monitor media platforms for activist activity. Strategies should also be prepared to counteract activist campaigns mounted in this way. The strategies should include options to address misleading statements, corporate governance challenges and other legal or reputational issues and should be developed with input from PR, marketing and legal experts.
Our experienced team is available to discuss these issues with you.