Venable partners Tuck Washburne and Mike Schiffer were quoted in a September 27, 2016 article the American Bankers Association's Banking Journal on how banks should engage with activist shareholders. This group of shareholders typically look to shake things up at underperforming companies by purchasing a large number of shares in order to obtain board seats.
Such moves are trickier in the banking industry where investors try to keep their stakes lower to avoid regulatory restrictions. According to Washburne, "shareholders are going to try to stay away from going over a 5 percent position unless they are willing to sign on for regulatory issues." Since 2015, there has been a marked increase in the number of activist campaigns. "Practically speaking, there is a lot more money in activist hedge funds than a few years ago, and the simple targets have all been used up," said Schiffer. "We are now far enough away from recession that shareholders…are no longer satisfied banks are just surviving—they want to see performance."
Washburne and Schiffer offered advice for banks to consider when interacting and engaging with activist shareholders. "You’ve got to interact to give them the right level of attention and show you understand what they are pushing for," said Schiffer. "Interacting doesn't mean capitulating. If they want a sale for a quick buck, you can say no." He also advised banks to "Monitor your stockholder base every single day and throughout the year… You don't want the first notice that you have an activist to occur when you receive a letter." Added Washburne, "Activists often have a long litany of things they want done. Sometimes they are pushing for something that is already part of the strategic plan and will be pacified if just one thing is done."