As proxy season approaches, corporate boards and nominating committees must prepare to face an array of challenges, not the least of which is the potential threat of shareholder activism. Activist investors, armed with alternative slates of board candidates, often seek to influence or even overhaul a company’s strategic direction. Whether to pursue “self-help” actions to defend against such activist initiatives or to take actions as part of a proactive governance strategy, strengthening the board is a critical exercise. This is particularly relevant in the September and October timeframe, when companies should begin launching board search and selection processes in preparation and in time for the following year’s proxy deadlines and Annual Shareholders Meeting.

Deadlines and the Proxy Timeline

The timeline for launching a board search and selection process is critical. Given the typical month-of-May Annual Shareholder Meeting schedule for many companies, September and October are ideal months for a nominating committee to launch a deliberate, thorough, and well-planned selection process. This allows sufficient time for planning, identifying, vetting, nominating, and ratifying new directors before proxy statements are finalized, typically in the early part of the following year. Here is a generic timeline featuring key milestones in reverse chronological order:

Starting the board search early enables the nominating committee to ensure that the selected candidates align with the company’s strategic objectives and the expectations of its shareholders. Moreover, this timing allows for planning of comprehensive onboarding of new directors, ensuring they are fully prepared to contribute effectively from the outset of their tenure.

Why Strengthening the Board is Crucial

In today’s complex corporate environment, a strong, diverse, and effective board is essential for guiding companies through strategic challenges and opportunities. A robust board can better navigate periods of uncertainty, drive long-term value, and maintain investor confidence. Strengthening the board ahead of proxy season serves two key purposes:

1. Defense Against Activism.

The quality of board candidates that activists are able to recruit has improved dramatically over the last decade. In the face of a potential activist campaign, a well-composed board can be a company’s first line of defense as either a far-sighted strategy, or as a “self-help” tactic toward a settlement agreement.  By refreshing the board with directors who bring new perspectives, industry and corporate situational experience germane to the corporate situation, strong governance credentials, and a sense of urgency that steps the pace of management decision-making, a company can address shareholder concerns preemptively, thus reducing the attractiveness of an activist’s slate.

2. Proactive Governance.

Even in the absence of an imminent activist threat, periodic board strengthening is a best practice in corporate governance. It signals to shareholders that the company is committed to continuous improvement and responsive to evolving business needs. This proactive approach can help maintain investor trust and support during the proxy season.

Listen to Lyceum’s A CEO’s Virtual Mentor^® podcast mini-series on Shareholder Activism

Everything You Always Wanted to Know About Activism*

*But Were Afraid to Ask

Chris Young formerly of Credit Suisse at the time of the podcast and now Managing Director – Global Head of Contested Situations at Jefferies will provide the framework, the steps, and the pathway. Highly experienced, independent director, Marjorie Bowen, will provide context as an activist’s board nominee in the setting of activism and also provide governance and management advice for these situations. Paul Toback will discuss his firsthand experience of being CEO at Bally Total Fitness and in the crosshairs at points along activist’s escalation the path. Governance expert Tanuja Dehne will provide governance and management considerations along the way.

Across the mini-series we cover:

1. The history of activism,
2. We explore what makes companies vulnerable to activists, and
3. We fully treat activism step-by-step through all points along an activist’s ‘escalation path’.

To explore the series follow the buttons below.

Strategies for Strengthening the Board

1. Identifying Corporate Uniqueness, Gaps, and Needs

Whether it is a single seat or multiple seats, Lyceum’s first step in strengthening the board is conducting a thorough assessment of the current board’s experiential composition and individual skills against the backdrop of strategic imperatives and the corporate situation. This involves an objective, independent assessment to uncover the uniqueness of the company in its competitive environment. This includes an understanding of strategic plans, stage of corporate lifecycle and corporate situation, corporate objectives, and policies. Followed by identifying any gaps in expertise that, if present might enhance the board’s ability to guide the company through its next stage of growth, risk, crisis. For more insight on Lyceum’s approach please contact us through the dropdown in Our Services page.

Once these gaps are identified, the nominating committee can align and focus the search firm to seek candidates who possess the necessary skills and experience to fill them. This targeted approach not only strengthens the board, but also positions the company to better address shareholder concerns and strategic opportunities. Furthermore, this approach offers clarity on specific focal points of need to appeal to and attract a diverse candidate pool that possess those capabilities.

2. Structured Assessment and Vetting Process

Lyceum’s assessment process ensures that new talent to the board can bring fresh ideas, energy, and perspectives that are essential for an effective board navigating an increasingly complex business environment.

3. Implementing Succession Planning

Succession planning is an often-overlooked aspect of board strengthening but is crucial for long-term stability and effectiveness. By establishing a clear succession plan, the board can ensure a seamless transition when directors retire or step down, avoiding disruptions and maintaining continuity in governance.

A well-developed succession plan should include:

• Emergency Succession. A plan for the sudden departure of key board members, ensuring that the board remains functional and effective.
• Long-term Planning. A roadmap for gradually introducing new directors over time, allowing for knowledge transfer and maintaining board continuity.
• Mentorship and Development. A program for mentoring new directors, particularly those with less board experience, to accelerate their contribution to the board’s effectiveness.

By incorporating succession planning into the broader board strengthening strategy, companies can ensure that their boards remain resilient and capable of meeting future challenges.

Conclusion: A Call to Action

For boards and nominating committees, the time to act is now. As the proxy season looms, strengthening the board should be at the top of the agenda. Whether defending against an activist slate or simply as part of ongoing governance improvement, launching a board search and selection process in September or early October is critical.

By proactively identifying and addressing gaps in board expertise, refreshing the board with new talent, engaging key stakeholders, and implementing robust succession planning, companies can position themselves for success in the upcoming proxy season. More importantly, they can demonstrate to shareholders a commitment to strong governance and long-term value creation, ultimately securing their support and confidence.

In an era where shareholder activism is on the rise and governance standards are increasingly scrutinized, a strong and dynamic board is not just an asset – it is a necessity.