Doug Rappaport and Jason Koenig Interviewed on The Deal’s ‘Activist Investing Today’ Podcast

On The Deal’s Activist Investing Today podcast, Akin shareholder activism partners Doug Rappaport and Jason Koenig were interviewed, covering a wide variety of topics, including the new 13D disclosure rules, strategic board subcommittee charters, the diminishing future of single-issue director contests and red flags in board tenure.

Commenting on the new 13D disclosure rules, Doug said, “For the vast majority of campaigns out there, the change from 10 days to five days is probably going to have a limited effect. I think there is going to be a distinct minority of campaigns out there, particularly circumstances in which you have an activist who is looking to accumulate a sizable position perhaps well in excess of five percent, perhaps even in excess of 10 percent before going public and if you’re dealing with a smaller cap company with a limited float out there, this will put pressure on them to be more aggressive in the market during that five-day window, and if in fact it puts that pressure on them, it can have the effect of creating more demand in the market and pushing up the stock price. But this impact is limited to a handful of campaigns as opposed to the majority of campaigns.”

On the universal proxy card (UPC), Jason said, “The [universal proxy card] makes contests more available, and it is easier for activists to pursue single-issue contests. UPC can help an activist raise awareness of certain social issues. I would argue that this will be an uphill battle [for the dissident investor] because [proxy advisers] and most institutional investors will want to see directors who are effective stewards of capital and can oversee the company in many ways, not just a single issue.” Most successful activists are ones that approach a board with a well-developed and detailed thesis and this includes ideas about which specific director candidates they have in mind that can help achieve those theses. Invariably these theses will be more multi-faceted and they will advocate for pulling multiple levers, not just focusing on a single issue.

Doug added, “I think we’re still in the early innings with respect to the universal proxy card, so we’ll have to see how this all shakes out. I would suspect that the universal proxy card helps facilitate the single-issue campaigns, but I think also the rise in impact investing, what’s often called ESG investing more generally is one of the reasons we’re seeing these sort of campaigns out there that are geared towards issues that are not traditionally perceived to be things to necessarily create immediate changes for shareholders with respect to stock value and otherwise.

Regarding red flags on boards of directors, such as directors who are over-tenured or boards that lack in diversity, Jason said “We regularly work with issuer clients and activist clients on identifying the red flags but from the issuer side, how they can ensure their board checks as many of the boxes as possible on the skills and characteristics matrices that we hear people refer to. An activist wouldn’t typically base an entire campaign around such deficiencies on a board, but where a board is weak in certain of these areas, it gives an activist another avenue to criticize an issuer and to draw a causal link to the fact that the board is lacking in certain of these areas and poor operation.”

To listen to the full episode, click here.