CEO exits among Russell3000 companies in the “normal course” of business average just north of 21% on a rolling 2-year basis.

But CEO exits skyrocket when an activist gets involved.

According to a new study by Strategic Governance Advisors (SGA), a subsidiary of FGS Global,  when activist investors obtained board seats at R3000 companies, the rate of CEO change over the subsequent two years more than doubled. 

It has become rare for an activist to explicitly campaign on a platform of CEO change. But the data suggest that once on the board, activists take a more direct approach to achieving that end.

In 2021, post-activism CEO turnover reached a high of 56%. And even when the activist does not win board seats, the CEO turnover rate often increases by more than 50%, to a rate in the low- to mid-30’s on a two-year rolling basis. 

  • Among the most prolific activists, more than one-third of the 34 companies at which Starboard launched campaigns experienced CEO change within two years. With Elliott, Land & Buildings and Carl Icahn, near-term CEO-exit rates were also much higher than baseline.
  • Among the most aggressive activists with at least five campaigns in the sample, rates of near-term CEO change ranged from 42% for Elliott to as high as 75% of the companies targeted by Engaged Capital.
  • Even among the 201 “one-time” activists in the sample, 30% of the companies targeted had CEO turnover within 2 years.

Shareholder activism – even if “unsuccessful,” but particularly when it results in an activist gaining board seats – can have significant implications for a company’s leadership. Boards need to consider these implications in communicating to investors and developing a strategy for responding to activism.

Prepare for Ransomware

In the wake of LockBit’s ransomware attack on Royal Mail, companies from all sectors are concerned with the increasingly aggressive and sophisticated threat of cyberattacks.  

FGS Global’s UK Crisis Communications Practice has thought through some best practices for companies assessing their cyber preparedness:

  • Ransomware attacks are about people. Navigating a cyber incident requires strong and effective leadership.  With the power to damage an organization’s reputation with key audiences, companies must put the people who matter most (customers, employees, investors or partners) at the heart of its communications approach.
  • Establish a policy on ransoms. Boards should get ahead of the issue by establishing a clear policy as part of their crisis and risk planning. This will help inform a company’s strategy and approach from the outset and can save valuable time in a crisis.
  • Always have backups. A strong IT infrastructure and capability is critical to managing a cyber-attack. Availability and quality of backups in particular will determine how quickly a company can regain access to data and restore its systems.
  • Make sure you are covered. Insurance is available to help companies recover from a cyber incident – but coverage needs to be paired with robust cyber hygiene and education to promote overall cyber resilience.
  • The key to effective communications is preparation. Timely communications driven by informed and decisive leadership and institutional preparedness are key to an effective response to any breach. Companies need to establish a highly integrated cross-functional team and have a response protocol including a cyber communications plan.

For more information, watch the webinar here.

Handle With Care

The fallout from the collapse of Silicon Valley Bank (SVB)–including concerns its problems were shared by or could spread to other financial institutions—continue to dominate the discourse and impact policy decisionmaking. For now, measures the Federal Reserve and Treasury announced last week appear to have stabilized the situation. 

In general, Democrats primarily blame SVB leadership and regulatory rollbacks during the Trump administration for the collapse while Republicans point to President Biden’s inflationary fiscal policies. While many Democrats have called for revising existing laws and stronger regulations, most Republicans maintain that it is too soon to act. 

Still, Congress has already scheduled the first of what promises to be several rounds of hearings examining all aspects of the crisis, while the Fed is working through its own review of supervision and regulation of SVB, with its findings slated for release in May.

Due to the weaknesses SVB’s collapse exposed in the entire financial system, Fed officials have found themselves forced to simultaneously fight two problems: financial instability and inflation amid evidence that the Fed’s actions to hike interest rates have affected the broader economy. 

The Fed attempted to straddle this divide by approving another quarter-percentage-point interest rate increase but signaled continuing instability could end its rate-rise campaign sooner than anticipated.

Breaking the Bank

The collapse of Silicon Valley Bank—and the government’s response—trigger populist sentiments across the political spectrum, according to our Research and Insight team’s findings. 

Here’s what they discovered in canvassing their insight community of 300 news-attentive Americans about the events:

  • Participants place responsibility for the collapse firmly at the feet of SVB’s leadership. But it triggers mistrust toward banks, tech companies and large companies more broadly. Participants are frustrated banks seem to have failed to learn from the mistakes of 2008, with Democrats believing banks have “gamed the system.” Republicans and Democrats alike feel startups were taking too many risks.
  • Participants across the political spectrum bemoan what they see as one set of rules for the wealthy and powerful, with another for “the common man.” Participants express anger that SVB executives may have “cashed out” ahead of the collapse, with Americans having to deal with the fallout.
  • Republicans are especially incensed at the decision to extend the FDIC’s guarantee to bank customers and clients with over $250,000 in deposits – with this decision in their minds undermining responsibility. Though Democrats are more supportive of the extension, some express anger that this means bailing out “venture capitalists” and big businesses.
  • Underpinning these views is a conviction that regulation has failed – most strongly expressed by Democrats, but also at times by Republicans. Participants on both sides talk about the rules and requirements for regional or small banks having been relaxed too much – with Democrats blaming the Trump Administration.
  • Some Republicans echo the narrative that SVB’s collapse was caused by “wokeness”– with some feeling SVB was “distracted” by green investing or was focused on liberal causes.
  • While many don’t believe they will be directly impacted by the collapse, participants across the spectrum are concerned about the ripple effect of SVB’s collapse – whether the potential for more banks to run into difficulties, or an already fragile economy to fall into a deep recession.
  • Most participants express continued confidence in the banking system – but they worry about other people panicking and putting “their money under their mattress.” However, others do see SVB as relatively isolated – in part as the bank is seen as different from most retail banks, given its focus on tech and start- ups.

For more information, please reach out to—and find the full report here.

By The Numbers

(Rumor has it 44,062 of them went to Princeton. Go Tigers! -Irene)

Eye on China

China is focused on kickstarting economic recovery and releasing pent-up domestic consumption demand. This was a key takeaway from one of China’s most important annual events – the National People’s Congress and the Chinese People’s Political Consultative Conference, known locally as “Liang Hui” or “Two Sessions,” which took place in Beijing earlier this month. 

In our comprehensive report on the Two Sessions, FGS Global’s teams in China and across our network share their considerations for international investors and companies in navigating the way forward:

  • Economic growth is THE priority. Above all else China is seeking a stable and sustainable economy to achieve its broader development goals. But growth can only be achieved with a confident private sector, highlighting a critical role for multinational corporations (MNCs) in both supporting China’s economic agenda and telling a more nuanced and realistic China story amid growing global tensions. This requires carefully managing associated risks and addressing the shared and different interests of stakeholders in China and at home.
  • Policy volatility is still a possibility, especially as the party expands and the state retreats. Major government restructuring and appointment of senior leaders with less experience than previous cohorts means the machinery of government will take time to get going. MNCs should fully use this transition period for continued engagement with stakeholders while closely monitoring how government restructuring will take shape—and how emerging policy details will impact the regulatory environment, business strategy and stakeholder landscape.
  • A Premier with influence? Observers are divided if new Premier Li Qiang is just a “yes” man or if his relationship with Xi Jinping gives him space to push back and have a stronger voice in the economy, one which advances the private sector. We may have more clarity in the coming weeks, with much-anticipated events like the China Development Forum and Bo’ao Forum for Asia offering an opportunity for Li and China’s leaders to engage with visiting global CEOs.

Find the full analysis here.

The End of an Era

After three years, 676 million COVID cases, 6.9 million deaths and 13.3 billion vaccine doses, Johns Hopkins University (JHU) has stopped collecting data for its Coronavirus Resource Center. The site became one of the pandemic’s most-visited resources for tracking COVID-19 around the world and was named one of TIME’s Best Inventions of 2020

Capital in Context caught up with our Head of Digital Development Dan Stone, who led the team that built the site.  

How did this project get started?  

JHU had started a dashboard tracking cases and deaths, but it quickly became apparent the pandemic would not be contained and the need for actionable, real-time data was growing. FGS and Hopkins have had a long-standing relationship so when Hopkins decided to scale a website around the dashboard, they reached out to us to support the effort. 

They needed what our team is optimized for, which is rapid response digital and web communications. We very quickly became the production team backing the website we designed and constructed around the dashboard. The initial call came in on a Saturday morning and by the middle of the following week, we had a website up. 

What strategies helped drive the Resource Center’s prominent visibility?

The JHU dashboard became the number one result in all searches related to the pandemic. First and foremost, this is because of the quality of the work, the data and the tireless efforts of different teams across the university. But we wouldn’t have been able to give them the traffic and those billions of hits the way it was initially launched. 

We had to figure out how to make the website a hub, not just for the great work that the original dashboard team was doing in tracking the core effort, but also, what myriad other groups across Hopkins were doing to study, educate, and inform individual and public health decisions. Our team helped get the SEO strategy moving in a way that really was able to propel us to maintain a dominant position for a long time. And the communications side of our team helped drive earned media, including getting CNN to keep Johns Hopkins numbers on their screen every day. Having that integration and partnership across the board was key.

What do you need to pull off complex, high-stakes projects like this? 

Resilience, personal commitment, and a truly collaborative team. This is a project we all feel equal parts proud and deeply grateful to have been a part of.

A Run for Their Money

The failures of Silicon Valley and Signature Banks this weekend have dominated the national conversation. There’s plenty of discussion still to come on how startups might think differently about cash management in the future, such as diversifying bank accounts and guaranteeing balances. 

But in the meantime, here are some communications lessons from the initial response to the crisis: 

  • In times of sensitivity and uncertainty like these, tailor communications to what’s incoming. There were a lot of startups and investment firms with some exposure to SVB—and plenty without. It was equally as important for those without exposure to communicate as those with. Many startups who were not impacted said so via a short tweet after getting a lot of inquiries. Others getting more one-off inquiries responded to employees, LPs and others directly.
  • Be as straightforward and transparent as possible. For a big part of the weekend, many companies were operating in a sort of gray zone, not knowing what would happen to the funds they had in SVB. Companies focused on the facts and tried to share as much as possible while also instilling confidence and working feverishly behind the scenes to address any immediate liquidity requirements.
  • Stay alert to opportunities for how to help. On the investor side, firms hustled to put together packages for startups and other companies that needed more cash immediately. Their ability to leap into action showed their value at a critical moment.
  • Twitter is still a primary source of news and an impactful communication channel.  VCs, founders and other financial industry players took to Twitter in droves to share status updates, provide suggestions and support, and put pressure on decision-makers to act.