Director nominees with CEO experience have long featured in Board slates put forward by activist investors. Those candidates were typically from outside the target company’s industry, and the applicability of their experience was often questioned. However, there is an emerging trend of activist investors utilizing CEOs with direct industry experience at competitor companies, and even attempting to bring back retired CEO predecessors as Directors. As the stigma of joining a dissident slate continues to dissipate, the quality of Director candidates is increasing, and they are more likely to have highly relevant industry expertise and even personal ties to the incumbent management team and Board. Companies are now sometimes fighting not just against outsiders, but against former colleagues, mentors or industry peers. This dynamic presents a new set of considerations for companies preparing for and responding to activist attacks.

 Starboard woos former Pfizer CEO and CFO

In October 2024, Starboard said that former Pfizer CEO Ian Read and former CFO Frank D’Amelio shared concerns about Pfizer’s direction and had offered to support Starboard’s activist campaign. However, both Mr. Read and Mr. D’Amelio later withdrew that offer and publicly backed Pfizer’s current CEO, Albert Bourla. Starboard alleged that Pfizer threatened Mr. Read and Mr. D’Amelio with expensive legal action.

Not being able to count on the support of Mr. Read, who served as Pfizer’s CEO for eight years and appointed Mr. Bourla as his successor, proved fatal for Starboard’s campaign. Ultimately, Starboard did not nominate a dissident slate at Pfizer ahead of the January 2025 deadline.

Key Lesson

Keep your CEO predecessors close. Activists have long utilized expert network firms to interview former employees and customers and gain insights into a company and its vulnerabilities. While predecessors and former competitors once participated in those conversations behind the scenes, some of those criticisms are now being aired in a more public forum. Companies need to have strong narratives on the progress their CEOs have made compared to their predecessors, looking not just at total shareholder returns (“TSR”) but specific domains where their predecessors may have been particularly adept, such as capital allocation or operational efficiencies. When possible, companies should also consider strategies for maintaining engagement with former executives who could be potential recruits for activists, even if these executives departed under acrimonious circumstances.

Ancora Targets U.S. Steel CEO with “Steel Industry Legend”

In January 2025, Ancora unveiled a slate of nine nominees to U.S. Steel’s Board, including former Stelco Holdings CEO Alan Kestenbaum, whom they positioned as a potential successor to U.S. Steel CEO David Burritt. Ancora called Mr. Kestenbaum “a steel industry legend” for delivering a 450% TSR at Stelco, a Canadian subsidiary of U.S. Steel that he acquired out of bankruptcy in 2017 for $53 million and sold for over $2 billion in 2024 to Cleveland-Cliffs.

Ancora contrasted Mr. Kestenbaum’s record with Mr. Burritt’s tenure at U.S. Steel, during which the company’s TSR lagged its peers by 228%. Ancora also argued that Mr. Kestenbaum had a “uniquely close relationship” with the United Steelworkers union and that he would handle labor relations better than Mr. Burritt, who has struggled to gain union support for his attempt to sell the company to Nippon Steel.

Key Lessons

Widen the CEO comparison screening aperture. Companies must prepare to defend a CEO’s track record not just against current peers, but also predecessors and former leaders of successful competitors. Companies in certain industries like industrials where all-star CEOs loom (e.g., the late Hunter Harrison in the railroad sector) are particularly vulnerable to these comparisons. They should also watch out for activists seeking to exploit any conflict between the targeted CEO and various stakeholders, such as organized labor, especially when rival or predecessor CEOs have managed these relations smoothly.

Elliott Goes after Southwest Airlines CEO with Former Industry CEO Trio

In August 2024, Elliott announced plans to nominate ten candidates to Southwest’s Board, including David Cush, former CEO of Virgin America, Robert Milton, former CEO of Air Canada, and Gregg Saretsky, former CEO of WestJet. While Elliott did not put forward any of the nominees as CEO, it called for Southwest CEO Bob Jordan to step down and demanded the resignation of Gary Kelly, the company’s former CEO, from his position as Executive Chairman.

Southwest responded by announcing that seven of its Directors, including Mr. Kelly, would step down and initiating a Board refreshment process. In October 2024, the two sides reached a settlement, with Southwest appointing six new Directors, including Mr. Cush and Mr. Saretsky, as part of five of Elliott’s nominees joining Southwest’s Board. Mr. Jordan retained his position as CEO.

Key Lesson

Relevant industry expertise on the Board is a must. While it may be tempting for a CEO to dominate relevant industry expertise on a Board, having multiple Directors with applicable sector knowledge and experience strengthens the Board’s credentials and bolsters its defenses against activist attacks. Evaluating relevant industry expertise and relationships should be a critical part of a Board’s skills analysis and refreshment process.