Directors & Boards: Feature

Home |

Subscriptions |

Articles Archive |

Current Issue |

Back Issues |

Shopping

Advertising |

List Rental |

Editorial Calendar |

Background |

Feature

Mike McCurry, Chairman
Randy Tate, Director
Grassroots Enterprise

From a Whisper to a Firestorm

How ready are you to respond to the revenge-laced rhetoric promoted by activist organizations and shareholder-revolt leaders?

Had your fill of politics in 2004? Well, if you’re a corporate officer or board member, there’s a good chance that you yourself are already being targeted by a very political opponent. And--most likely--you don’t even know it.

Over the last few months, activists and their allies have begun setting their sights on directors and senior managers at a dramatically accelerating pace. Their goal is simple--stop focusing on traditional tried (and tired) boycotts for which corporations are well prepared, and instead focus on weaker flanks.

Ambitious pension fund trustees, family values activists, enviro-advocates, hostile ex-company officials, and other shareholder activists are targeting individual board members, senior management, business partners, and even stock prices to achieve their goals. They are getting traction and are gaining speed.

Online Mobilization
When Sinclair Broadcasting Group announced it would show a controversial documentary on John Kerry last fall, left-leaning opponents quickly mobilized online to target not just advertisers but major shareholders as well. In the heart of the firestorm, Sinclair’s stock dropped by 8 percent in just one day. On the right, the activity has been just as strong, with targets including Procter & Gamble and ABC’s “Desperate Housewives.”

To further strengthen their hands, interest groups are partnering with public pension funds to pressure executives. As The Wall Street Journal recently noted: “The willingness to hire former activists reflects a growing trend among big industrial companies to deal with environmental groups rather than dismissing their concerns. Earlier this year Exxon Mobil Corp. agreed to hold regular meetings with Amnesty International to monitor the oil company's human-rights performance. Amnesty had joined with the New York City Employees' Retirement System, a major Exxon Mobil shareholder, to press for the meetings.”

A ‘Perfect Storm’
Why is this happening? A “perfect storm” combination of: 1) new political realities; 2) corporate scandal; and 3) technology.

On the political front, the 2004 elections sealed a virtual Republican Party lock on Congress and, coupled with a second Bush term, will all but freeze the legislative turnstile for proposed business constraints coming from Capitol Hill. Faced with a four-year uphill battle and dim prospects for legislative victory, many savvy liberal activists have understandably started to shift their focus from D.C.’s K Street to Wall Street.

At the same time, epic corporate scandals at Enron, WorldCom, and other business giants provoked anger, bitterness, and widespread receptivity to the revenge-laced rhetoric promoted by activist organizations and shareholder revolt leaders. The result: a willing army of skeptical investors ready to follow, and a series of SEC proposals that would make such revolts easier than ever to win.

Technological Facilitation
Finally, on the technology front, the Internet has enabled activists to organize with a speed and at a magnitude unprecedented in history. With the costs of spreading a message reduced to essentially zero, what begins as a compelling notion in one webmaster’s mind can spiral into a movement of millions within hours.

In 2004, we saw this play out in the presidential race. In 2005, we are seeing it on the corporate front. Online communications enables increased coordination of disparate stakeholders. New media, most notably blogs, allow stories to percolate and then explode overnight.

As Winston Churchill said, “A lie can make its way around the world in the time it takes the truth to put its pants on.” But in the age of the Internet, that lie can go global before the truth even has the chance to wake up at all.

Going on the Offensive
So what can you do about all this? Well, you can sit around waiting to be attacked, or you can prepare yourself--and even go on the offensive:

• Watch for Trouble: Some of the biggest, most damaging controversies involving corporations over the last year began as mere whispers on the Internet, unheard by their intended victims until it was too late. It is critical to keep an eye on what activists are saying online--and to react as quickly as possible when untruths are being spread.

• Build Relationships Before the Trouble Starts: You may be working hard to build a relationship with your customers and partners, but what about your shareholders? Are you sending out regular, personalized communications to them to let them know all the good things about your company, or are you just sending them a form letter once a year?

• Speak “Bilingually”: If your shareholders are being targeted by cause-oriented activists, it will do you no good to speak to them solely about P/E ratios and EBITDA figures. On the flip side, because they are investors, you still must address critical issues of corporate performance. In short, speaking with them is not just a job for investor relations or corporate communications; you need specialists who understand both sides of the equation or you will lose credibility and opportunity. You need people who can discuss “shareholder value” as well as “shareholder values.”

The terrain is changing, the stakes are rising, and the attacks on big business are inevitable. But with time and energy invested before the crisis hits, these are political campaigns that companies can win.

Mike McCurry is principal at Public Strategies Washington, a government relations and lobbying firm, and chairman of Grassroots Enterprise, a public affairs firm, http://www.grassroots.com. He served as press secretary to President Bill Clinton and to numerous presidential candidates and U.S. senators, and was a director of communications for the Democratic National Committee.

Randy Tate is founder and president of Tate Strategies, a public affairs firm, and a director of Grassroots Enterprise. He is a former Republican deputy whip and a past executive director of the Christian Coalition.

Ed. Note: The authors say they don’t always see eye to eye when it comes to politics, but they are 100 percent in sync when it comes to the politics of business. They can be contacted at mccurry@grassroots.com and tate@grassroots.com.