McKinsey describes shareholder activism as more global, more strategic and often less public than the familiar proxy fight. The article urges boards and CEOs to examine the strongest outsider case against their own strategy instead of treating activist scrutiny only as a communications crisis.
An internal challenge before an external campaign
McKinsey proposes an annual diagnostic: management writes the most persuasive critique an activist could make, then distinguishes valid performance gaps from demands that would damage long-term value. The point is not to copy every activist proposal. It is to show why the company’s own choices—investment, divestment, operating repair and leadership—can produce durable returns.
What the evidence does and does not say
The article reports that companies with weaker returns before a campaign have tended to see the largest improvement afterwards. It also notes that gains can fade: in a review of almost 170 campaigns, roughly 40% of firms with positive excess returns during activist ownership had negative excess returns in the three years after exit. That makes the quality and durability of the response more important than the immediate market reaction.
Key takeaways
- Ask which three to five weaknesses an informed investor would raise and what evidence would support them.
- Revisit whether each business is worth more inside the portfolio than outside it.
- Make capital allocation and operating improvement milestones legible to shareholders.
- Treat board capability and CEO succession as part of the value-creation argument.
What this means for CEOs
A CEO and board should be able to explain where value is created, where capital is trapped and which decisions would change their view. If they cannot, an outsider may set the agenda first.