Activist investors are playing a greater role in shaping companies’ strategic priorities, Dale Buss observes at Chief Executive, pushing for bigger and faster changes and forcing out CEOs or directors when they don’t see results. What’s more, he adds, “CEOs aren’t just being assessed for weakness by activists based on financial performance”:
Another factor is that CEOs across entire industries seem to be overwhelmed these days by the speed of change. “Retail is a great example,” said Micah Alpern, principal at A.T. Kearney consultants. “So much is happening and there are so many factors you have to consider to be effective and remain relevant today.” …
Carol SingletonSlade, global energy and U.S. board practice leader for Egon Zehnder recruiters, said that activists also are applying new criteria for gauging the performance of CEOs in addition to traditional financial measures.
“CEOs across industries are measured against how they have led their organizations through digital transformation, if their business strategies have allowed them to remain relevant amid constant disruption, and at the same time, how well they have been able to maintain company culture while being under intense pressure to perform and remain agile.”
These observations are consistent with what we’ve been seeing in our latest research at CEB (now Gartner) on how investors are engaging with talent and change management issues. Our recently published Investor Talent Monitor (which CEB Corporate Leadership Council members can read in full here) shows that organizational culture, recruiting strategies, and other talent issues are coming up with greater frequency on investor calls.
With constant disruption, shareholders are no longer satisfied with quarterly updates on financial results, but instead need longer-term strategies that can deal with change. They want to know about culture, about talent, and about how human capital strategies impact corporate financial performance over time. In fact, the Workforce Disclosure Initiative, backed by 79 institutional investors with a total of nearly $8 trillion of assets under management, recently sent a survey to 75 “megacap” companies to request information about their “governance of workforce issues, global workforce composition and stability, training and development of people, and worker engagement.”
Other recent evidence of this trend abounds, including State Street Global Advisors’ announcement in March that it would begin using its leverage to push for greater gender diversity in the leadership of major companies, the confrontation in April between American Airlines CEO Douglas Parker and major institutional investors over his plan to raise wages for crew members across the board, and Etsy’s investors stepping in to force the online retailer to scale back its compensation and employee perks in pursuit of profitability.