Companies Using Deals With Activists to Protect Directors

Corporations may be settling with activist shareholders and granting them board seats more quickly than in the past, in part because it helps entrench the company’s directors. According to a review by Bloomberg BNA, common provisions in recent settlement agreements include those that prevent the activist from acquiring or transferring shares for a period of time, require the activist’s representative on the board to vote for board proposals, and prevent the activist and its nominee from making public comments about the company, its officers or the board. While the company in question had to make concessions to the activist, the settlement’s defensive clauses help it to secure the position of remaining board members and co-opt the activist’s director nominee into voting with them.