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SPECIAL REPORT THE FUTURE OF SHAREHOLDER ENGAGEMENT Today’s shareholder activists are not the corporate raiders of the ’80s—powerful predators fueled by junk bonds who stalked vulnerable companies, swooped in with a leveraged buyout and greenmail, and left the scene as quickly as they came. In the current environment, by contrast, activists, though still powerful, depend on skill and finesse, using a playbook that’s more Bobby Fischer than Bobby Knight. In fact, many have been lauded by executives and boards alike for their thoughtful research, intelligent analysis, and, more often than not, their ability to ferret out unrealized value for the benefit of all shareholders. In a recent shareholder engagement roundtable held at the New York Stock Exchange—as part of NYSE Governance Services’ Future of Responsibility, Governance, and Ethics (FORGE) 50 initiative—a conversation comprising 18 of the nation’s leading activists, investors, CEOs, and directors led to observations that activism is creating stronger companies, better governance, and increased long-term value for shareholders. The overarching premise is this: Activists are not a breed apart from other corporate owners. They do have a larger concentration of shares, which decidedly gives them a voice and an advantage—a position they use to advocate (or agitate) for change in what they’ve deemed to be undervalued companies. Far from being viewed negatively, roundtable participants largely agreed that having an activist interested in your stock is a vote of confidence, because they are looking for companies that have tremendous potential upside. CO R P O R AT E B OA R D M E M B E R S E CO N D Q UA RT E R 2 0 1 6 A LOOK AT THE LANDSCAPE Taking a step back, the evolution surrounding activism has been building slowly since the financial crisis in 2008, when many companies began hoarding capital after the financial collapse and ensuing economic downturn. Since that time, activist funds have grown nearly sixfold—from $32 billion to $173 billion. The lack of capital deployment in the ensuing years, combined with sluggish rates of return, has frustrated many investors, spawning increased demand that companies figure out how to unlock value and jumpstart growth. Admittedly, some activists have used more stick than carrot to pursue these objectives, but by and large, today’s activists would prefer to pass “Go” with the support of the board for a well-though-out strategy than get mired