Compensation committee membership is the most sought after board position for activist investors seeking board and committee-specific assignments, according to a report this week by the Wall Street Journal which examined 82 different activist settlements. The report further confirms a theme the Center has long reported on - board representation and executive compensation serves as the major leverage points for activist investors seeking changes at a target company. The theme clearly carries through in the articles, supported by several quotes from major activist investors, including David Batchelder, co-found of noted activist Relational Investors LLC, who stated of all the board roles, the compensation committee role "is the only one that really counts." As for the content of the report, the Journal found that 51 of the activist settlements it reviewed included specific board committee assignments. Of those 51, 28 were compensation committee assignments - the highest number of any committee assignment - with nominating and governance committee assignments second with 26. The view communicated by the article is clear: participating in the determination of top management gives activists the most control they can get over management to achieve strategic change. Asking the question, does pay drive the right types of strategic behavior, is the primary avenue and driver of change.
As noted, the use of pay has been, and continues to be a major leverage point for activist investors. The manner in which activists will use pay is described in detail in the Center's "Guide to Shareholder Activism and Executive Pay".