Shareholder Activism & Response Flashcards

A company enters a cooperation agreement with an activist investor. Which clause is most commonly included to limit future disruptive activity by the activist?

Answer: A standstill provision restricting the activist from acquiring additional shares or launching new campaigns for a set period

Standstill provisions in cooperation agreements typically prohibit the activist from increasing its stake, nominating additional directors, or soliciting proxies for a defined period.

An activist pursues an 'operational activism' strategy rather than a 'governance activism' strategy. Which campaign objective best characterizes operational activism?

Answer: Demanding a spin-off of a business unit to unlock hidden value

Operational activism targets corporate strategy and capital allocation—such as divestitures, spin-offs, or cost cutting—while governance activism focuses on board structure and voting rights.

A pension fund sponsor sends a letter to a portfolio company requesting it adopt a say-on-climate advisory vote. This is an example of which category of shareholder engagement?

Answer: Environmental and social (E&S) focused shareholder activism

Requests for say-on-climate votes represent E&S-focused shareholder activism, where investors seek greater corporate accountability on environmental issues through advisory votes.

A company's board adopts a bylaw requiring 90 days' advance notice for director nominations. How does this bylaw primarily serve as an anti-activism defense?

Answer: It limits the ability of an activist to launch a last-minute director campaign by requiring early nomination disclosure

Advance notice bylaws require director nominations well before the record date, giving management time to prepare and limiting surprise proxy contests close to the annual meeting.

Which of the following best describes a 'wolf pack' activist tactic?

Answer: Multiple activist investors coordinating informally to accumulate shares and pressure a single target without triggering group disclosure rules

Wolf pack tactics involve multiple hedge funds separately but informally accumulating stakes in a target company, creating combined pressure without forming a 13D group that would require joint disclosure.

An IR officer is preparing a vulnerability assessment ahead of an anticipated activist campaign. Which metric is LEAST relevant to that assessment?

Answer: The company's sovereign credit rating

Sovereign credit ratings are irrelevant to a shareholder activism vulnerability assessment, which focuses on stock performance, capital allocation efficiency, governance quality, and compensation alignment.

When an activist's proposal is submitted as a shareholder proposal under SEC Rule 14a-8, a company wishing to exclude it from the proxy must:

Answer: File a no-action request letter with the SEC explaining the basis for exclusion

To exclude a Rule 14a-8 shareholder proposal, the company must submit a no-action request to the SEC Division of Corporation Finance explaining which exclusion ground applies.