Pre-pandemic, activists found new acceptance among institutional investors as they focused on unlocking value, creating efficiencies, and operating in a global environment with a focus on corporate and social responsibility governance issues. In what might be seen as a direct response to this trend, in August 2019, a group of 181 chief executives signed a “Statement on the Purpose of a Corporation” affirming that the largest corporations in the U.S. have a “fundamental commitment” to “all stakeholders,” including customers, employees, suppliers, communities, and shareholders.
Post-pandemic, both activists and shareholders will be forced to confirm their commitment to some of their pre-pandemic rhetoric. With lower market values and shrunken valuations, large cap corporations could be attractive targets for activists, who may simply make a value play or, more likely, may use the Covid-19 crisis to make their case as to why a change is needed. More limited access to capital markets and pressure from their own shareholders may increase the pressure on traditional activist funds.
For their part, corporations will face their own pressures. While they will likely claim that was impossible to predict the pandemic, that will not stop their leadership from being judged according to their response to it. They will likely be scrutinized, not only by outside investors, but also by lawmakers who have placed strict requirements on corporations that are seeking government assistance during the crisis.