The year 2026 started with several events that caused major changes in the market. U.S. military action in Venezuela and threatening actions against other South American countries, uncertainty over the death of a protester during a civil unrest in Iran, and the U.S. Department of Justice opening a criminal investigation against Federal Reserve Chairman Jerome Powell are among the events that are scaring investors around the world.
Company board members need to be aware that shareholders may be a little nervous over the coming months, and nervous investors are likely to approach directors with their concerns. Boards will come under intense scrutiny as proxy season approaches, and changes to board composition will likely be on the agenda of some shareholder activists. More moderate shareholders may also question whether the board, as currently constituted, has the skills and experience to deal with an environment that proves to be increasingly volatile.
Smaller publicly traded companies may be particularly vulnerable to this type of criticism from their largest shareholders. Take workforce solutions company TrueBlue, for example, where one of the company's largest shareholders is pushing three candidates, even though the board recently added two new directors to address perceived gaps. that selected. In a letter to the TrueBlue board, EHS Management, LLC said that while the addition of two new directors is “a first step toward meaningful change,” the board still needs to:
- An experienced, independent staffing executive who provides trusted strategic, operational and cultural direction.
- Experienced technology product leader with a track record of building or scaling digital platforms.
- Capital allocation and market expertise in areas most relevant to company performance (including M&A). and
- Increased insider ownership and financial “involvement in the game” by independent directors (to enhance accountability).
The issues raised by TrueBlue shareholders are similar to those some boards may face in the coming months. Boards can correct the problem and avoid shareholder concerns by considering the following:
Re-evaluate market risks in light of new domestic and international developments. Board members and management may need to determine whether projections and assumptions for 2026 remain valid based on world events and market volatility. Investors must be immediately notified of any adjustments to the strategy. If you are confident in your previous forecast, you should also communicate to shareholders why the board still supports that previous forecast.
Determine how new risks and market realities will impact the long-term nature of your business. As with advances in AI, market disruptions may require new strategic approaches to the direction of a company's business, operations, and culture. Directors who don't align with that idea may need to be replaced. New risks or market developments may require us to transition from one product line to another to foster long-term growth. The value of each board member's expertise can vary depending on the company's strategic direction. You may need to adjust your board configuration.
Communicate your desire to add expertise to the board. Changing market conditions may require necessary adjustments to the composition of our board of directors. Boards can communicate their openness to improving composition and expertise without condemning the current composition. Some expertise can be added through third-party consultants while the board vets other suitable candidates who may replace current members in the future. If a particular shareholder has a critical need for your expertise, talk to them and ask them to help you resolve the issue before forcing a vote to remove the current board member.
Compensate management and board members with more company stock than cash to improve decision-making. EHS management believed that if TrueBlue's board had more “power in the game,” it would do more to avoid losses for the company. We expect more shareholders to propose this compensation adjustment as market risks increase. If a shareholder proposes such a move, the board will need to prepare a response.
