Research by Chazen Senior Scholar Wei Jiang investigates why activists are increasingly entering into comparison agreements with target companies The message to non-U.S. boards is clear: if you don`t think about activism, you should be. This does not mean that foreign issuers must adopt U.S. practices by reflex; They shouldn`t. But this means that non-U.S. boards should ensure that they are ready to attend an activist event and consider a strategy that not only takes local conditions into account, but also is informed of the relevant lessons of U.S. experience in shareholder activism. If your board is like many others, you can see the watch turn on a transaction contract and wait for the next knock at the door. The time to start planning these moves is as fast as possible. If the militant fails to slip his agenda into the meeting room, another battle is likely. If the company is unprepared, the activist may return after the transaction agreement to take control of the story before the company does so. Your activist will then try to pay tribute to their best ideas in addition to yours, unless you openly claim these ideas and initiatives.
The company can set a cap on these expenses. While agreed caps vary from regulation to regulation and will depend to some extent on the extent of the activist actuator at the time of counting, they generally range from a few hundred thousand to half a million dollars. The table on page 82 shows a sample of the repayment caps agreed upon in a number of recent transaction agreements. Shareholder activism is also growing around the world. Boards in Europe and Asia are under increasing pressure from activists. In these situations, boards have opposed not only local activists, but also American activists who want to strengthen their influence and investor base abroad. Where reimbursement is included in the comparison, the activist shareholder will probably want the company to reimburse all expenses related to the following activities: how long should the company agree to support the choice of candidates of the activist shareholder? The length of time the company declares itself ready to keep the nominees of an activist shareholder on the board of directors is a frequent bargaining point between the company and the activist. The duration of a status quo period should be considered, both for the company and for the activist shareholder.