As I’ve gotten older, become a parent, and seen my responsibilities increase, I’ve noticed a rising desire from within to control my future. In an uncertain world, I crave more stability—needing to be the one writing that doc, booking that thing and keeping things tidy. In short, I’ve developed anxiety. Thankfully, in this day and age, many people have some level of anxiety. So talking about it, and admitting to it, is more acceptable than ever and it can help in relationships with the people who are affected by it (colleagues, family). My own experience has allowed me to see why someone does more than they should, and takes longer to trust others. 

I also now see why there are a subset of investors who use this same approach—exerting control—to invest. So-called activist investors accrue positions in companies in order to have a say (like taking a board seat) on who runs the company, and how they run it—often in an effort to improve profits of the target company which, in turn, makes their own profits. This has the potential to boost the value of the company for all shareholders. However, activist investors may not always do good for all. For example, they may be short-term focused, influencing management to make decisions that benefit the company in the near term, potentially to the detriment of shareholders with a longer-term time horizon.

Some well-known activists include: Bill Ackman – Founder of Pershing Capital, Carl Icahn – Founder of Icahn Enterprises, Nelson Peltz of Trian Partners, and the principals at Starboard Value as well as Elliott Management.

Why it matters I’ve noticed a recent increase in this activity, particularly in the consumer discretionary sector where many companies have struggled thanks to inflation, increased competition and a consumer slowdown. With that, the ability, or lack thereof, of management teams to pivot and solve for current conditions starts to become more and more apparent. And it shows up in their stock returns:

Recent examples of activist interest include Icahn at Disney, Elliott Management and Starboard Value at Starbucks and Ackman at Nike. I believe it’s without coincidence that all of these target companies have historically strong brand franchises. Activist work gets more attention when a brand alone carries intangible value. The existence of these high profile transactions, and any resulting changes, can sometimes be enough for an expedient jump in a stock price. 

As an example here’s a chart of what happened to Starbucks recently:

Of course, it remains to be seen if their influence and the recent management changes will make lasting improvements. 

There is also another reason why activism may be on the rise: the Universal Proxy Card rule, which became effective in 2022. Before this rule, shareholders could only vote for board nominees from separate proxy cards—provided by companies or dissidents, making it difficult to mix and match nominees, unless a shareholder attended the annual meeting in person. The new rule mandates a universal proxy card listing all nominees from both the company’s side and any from the activist investor’s side, allowing shareholders to freely choose their preferred candidates regardless of who nominated them. This was used in the case of Disney and, more importantly, potentially speeds up the impact activist investors can have on a company.

So I expect we’ll see more in the way of controlling positions at companies, as long as there is value to unlock. 

As for me, I’m working on releasing some control, instead of increasing it—by actively admitting no one person can handle everything, slowly learning to let my partner do more, and trying to be ok with things not being perfect.