The current state of activism can be referred to as a dynamic movement that influences financial value.

The current state of activism can be referred to as a dynamic movement that influences financial value, although many corporations perceive the activist as a force that only disrupts the dynamic of how corporations conduct their business. In truth, those terms, disruption, force, value, activist, remain the same, but the connotation behind them is evolving.

“We’re in ‘phase two’ of this activist campaign world,” says Patricia Lenkov, Founder and President of Agility Executive Search LLC in an interview on Thursday, January 18. “In ‘phase one,’ traditionally the activist investor would buy shares, disclose where they would like to see change [in the company], and the common corporate response would be to ‘circle the wagons’ and try to ignore them.”

In her executive search practice, Lenkov frequently works with activists investors. Her years of experience in this particular space has shown her that when board members, and perhaps CEOs as well, listen to activist investors, they are often exposed to a new point of view or idea that wasn’t recognized. “The corporate fear of activists tends to be driven by the idea that an activist will cause the company to lose their focus on running the business,” explains Lenkov. “Today, the environment is shifting. Companies are beginning to realize that they must listen to the activist investor.”

Activist investors are, naturally, business and finance people who have spent copious amounts of time analyzing a company, for which they either have investments or plan to invest in. The data is ultimately valuable, regardless of the company’s usage for it, because it can provide insights, ideas, directions, opportunities, etc., that the company may not have previously considered.

Value and insight will vary depending on the situation and activist. “Not all activists are created equal, and not all use the same strategies, or have the same quality of proposals,” states Lenkov.

She continues, “Essentially the insight comes extensive analysis on your company from the perspective of an experienced, well-qualified outsider, who, by the way, has invested in your company, and has a vested interest in seeing your company succeed and perform better. Sometimes their time horizon can be different, but regardless, they have goals very similar to your company’s.

“If one item of the activist’s proposal ends up introducing a new idea, or leads to a new idea, then listening to the activist ends up being a practical decision for the long-term.”

The corporate practice of being more attuned to the information presented by activists is gaining popularity among board members from multiple companies. Some examples of this in recent years include Seagate Technology’s invitation to ValueAct to become a major shareholder, as well as General Electric’s welcoming of Trian Partners as a company shareholder.

“It’s important to remember that listening to the activist doesn’t require you, as a corporate executive or member of the board, to agree upon every single item that’s brought to attention,” says Lenkov. “Sometimes nothing is going to be agreed upon, but the most important step is to be open to what the activist’s ideas are about your company. After listening you may want to ask, ‘It is possible to benefit, and if so how?’”

Even if an activist’s proposal does not contain anything useful to the company in its current state, it could bring forth the spark of a new idea. Open communication will, undoubtedly, benefit a company by bringing a new point of view to the table.

In preparation for meeting or communicating with an activist, the company should take the appropriate steps to understand whom they are speaking with, and the track record of the activist in question. This includes staying on-top of the data, be it articles, reports, analyses, etc., that provide information on that activist’s track records, campaigns and the like.

“Examples of important items to be aware of on are publications, like Larry Fink’s letter to CEOs, reports, like Lazard’s annual report highlighting the amount of activist directors on boards, and/or specialized analyses like, for example, Trian Partners’ 90 page disclosure of what Proctor and Gamble needed to change,” explains Lenkov.

She continues, “Know the track record, motives, successes, of the activist, as well as the lack of results from your own company’s perspective that show you might be underperforming compared to your peers and the market.”

Board members and executives should make an honest attempt to understand their shareholders’ interests and concerns, and that means communicating with them. Show your shareholders and investors that you’re willing to communicate, and you may be able to gain a new idea or perspective that can put your company on a stronger path towards creating value.

Check out more conferences related to shareholder activism!

Originally published on More articles by Christopher Skroupa on his Forbes column.