Twitter Slam Following a Whisper Campaign: The New Activist Investor Plan

Financial executives at underperforming companies should expect activist investors to come at them “quietly” at first over the next year, but then they should prepare for a full on social media blitz if both sides can’t come to terms with management changes, according to a survey

Over 50 percent of activist investors say they and shareholders work together cooperatively “more often than not” to affect change without receiving media attention, according to the latest Shareholder Activism Insight report issued by law firm Schulte Roth & Zabel and Mergermarket. The survey cited reputational reasons for working privately, since public disputes can hurt a company’s image and its client base. Just 32 percent of corporate executives think activists and companies have a cooperative relationship.

“Businesses are proactively reaching out to activists, even though these investors are headstrong in their demands,” the report quotes one CFO of a U.S.-based media company as saying in response to the question. “Some shareholders and businesses work together to keep media away from these activities, which is a win-win for both parties.”

Recent reports seem to bear out the trend. Just this week, Deutsche Bank AG replaced its CFO with a partner from Goldman Sachs following a quiet investor push resulting from ongoing financial performance issues.

However, if the company and activists can’t come to agreement, CFOs and management should expect a Twitter, press release and social media blitz to drum up investor support.

Eighty-eight percent of U.S. activist investors polled in the survey expect social media to become a stronger force within the community, with the report adding the response was “unsurprising given how far social media has permeated business, allowing activist campaigns to be played out through public digital communication forums.”

Beyond being used as a platform for activist flame wars, some financial executives see social media as just another channel for investor communication.

“Social media gives shareholders the freedom to express their feelings about businesses openly, and to meet like-minded investors,” the report quoted one CFO as saying.