As a CEO coach, I’ve witnessed many times when activists have orchestrated the ousting of a chief executive, often with a board that is anything but surprised. Behind closed doors, I’ve had many directors tell me they quietly agreed with a transition. These activist investors secretly strike terror in the hearts of boards and CEOs, seeking to profit quickly by buying stakes in companies to influence management and strategic decisions. Their goal is to unlock shareholder value that the activists claim is trapped—by complaining loudly in public about their point of view. They often push for what companies see as radical change: leadership shake-ups, operational overhauls, financial engineering, or strategic pivots they insist will capture that “hidden” value.
And I’ve seen things escalate quickly. If the idea of a sudden, bloody purge at the top of a company—a decapitation, French Revolution-style, gains traction with vocal investors, then a coup can quickly follow. This can disrupt, or even brutally accelerate a succession process that you thought you were managing. And it doesn’t take billions to derail a peaceful transition, either.
Just this year, Unilever stunned investors by ousting CEO Hein Schumacher less than two years into the job—one of this year’s many high-profile decapitations. The board, long under pressure from that self-same activist kingmaker, Nelson Peltz, finally pulled the trigger. Board members confided that the decision was ultimately driven by simmering impatience with the pace of Unilever’s turnaround, incessantly stoked by Peltz and Trian, which had built a significant stake and pushed for sweeping changes for almost three years.
Michelle Seitz, former CEO of the $1.2 trillion-advised Russell Investments, suggests an exercise: “If I were to write an activist letter, what would I say? And what would my response be as CEO? That’s managing the risk of your business.” To do as Seitz suggests, think of ways you might spike short-term shareholder value if you were the activist. Then be ready to walk into your board with a plan for how you would deliver similar results yourself—but in a more thoughtful way that benefits investors with both a short-term focus and a long-term stake.
Seitz adds, “Whenever I get called to come on to even very prestigious boards…because they have an activist and they want someone on the board to deal with them, my answer is, ‘It may already be too late.’” It’s no fun parachuting in to mediate a fight that should have been preempted years earlier rather than a defensive response that smacks of complacency.
Her prescription is something I practice frequently with CEOs preemptively: Write an aggressive, well-articulated vision for how you will transform the company even faster next year— a sort of new year’s resolution—an urgent red team exercise to escalate clear milestones and deliverables no matter how successful you think you’ve been this year. That’s the bold message that you will keep your investors and team ruthlessly focused on—before the activists show up with their own script for your decapitation.
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