Don't Go Into a Proxy Fight with One Hand Tied Behind Your Back

• January 23, 2018

After investing in their stock last summer, activist investor Bill Ackman of Pershing Square went after human resource services provider ADP.  He proposed replacing the CEO and asked for Board seats. What ensued was a nasty proxy fight that played out on CNBC.  Both sides peppered shareholders with webinars, letters to shareholders, highly targeted advertising, and more.

Ackman, who reportedly boasted that he “gets more clicks on that internet that anyone except Donald Trump”, also took to social media.  He promoted his cause on his personal Twitter account to his 15k+ followers and created the ADP Ascending account specifically for the proxy fight.  Some of ADP Ascending’s few followers were large shareholders of ADP.  In addition, Pershing Square promoted the content on the account to targeted investors.

ADP ceded the social media battlefield to Mr. Ackman, despite the fact that the majority of Americans get their news from social media.  Increasingly proxy fights play out on the social media stage. Investment professionals use social media to keep tabs on current and prospective investments.

Other than a few business-as-usual tweets on its September Analyst Day, ADP did not mention any investor topics on its Twitter, Facebook or LinkedIn presences during the proxy fight.  Their content remained customer focused, which is understandable.  Why upset happy customers with board room drama that may never affect them?

Like Mr. Ackman, ADP could have created social media accounts specifically for the proxy fight.  While short term issue-specific accounts rarely garner many followers, content on the account can easily be promoted to key investor stakeholders.  Lastly, ADP CEO Carlos Rodriguez could have taken this on personally.  Investors expect to hear from the company and the CEO.  Unfortunately, Mr. Rodriguez does not appear to have any public facing social media profiles, so he was absent from the social media discussion as well.

While ADP and Mr. Rodriguez were prepared in many channels, they were not in social media.  Unwilling to use their branded social media account to reach shareholders, they should have had alternatives in place well before the crisis hit.  One might have been a dedicated “news” oriented social media account that was geared towards investors and the news media.  Bank of America News is a good example on Twitter.

Another alternative is CEO Carlos Rodriguez.  CEO social media accounts, if well managed, are a great way to communicate with shareholders who expect to hear from the CEO.  But as PR Week notes “a crisis is not the time to test whether the CEO is up to the task.  Advance preparation is critical.”

Of course, ADP and Mr. Rodriguez came out victorious in the proxy fight.   But there are still lessons to be learned for others who may not be so lucky.  Here are three tips.

1)   Build Relationships with Current Investors.    Investor satisfaction is a resource you can tap into when things get ugly.  

2)   Prepare for Activist Investor Scenarios.  While it’s impossible to identify every threat, consulting firms and other resources are available to help. Demands for social responsibility are increasingly common.  Whenever possible, threats should be mitigated in advance.    

3)   Develop Draft Messaging and Communications Plans.  Every attack varies slightly, so you will never get it 100% right…but you will be so much further along than if you had to start from scratch.

4)   Ensure that you Have the Right Tools in Place.  Do you have the right Communications and Marketing resources (internal or external) to execute your draft plan?  Do you have the right communications platforms in place?  Of course, this includes social media.  Have you established well followed social media accounts that can be employed during an attack.  If this includes leadership, make sure that the CEO’s account is well established with consistent content, well in advance of any attack.  

Activist investors and proxy fights can be huge distractions from the business.  But with planning and the development of foundational tools, you can be better prepared to take on the challenge.