Taylor Wimpey Faced A Major Rebellion From Heavyweight Activist Investor Elliot

Taylor Wimpey Faced A Major Rebellion From Heavyweight Activist Investor Elliot

What has happened?

On 10th December 2021 leading housing developer Taylor Wimpey faced a major rebellion from heavyweight activist investor Elliot following the seemingly sudden shock resignation of the CEO, Pete Redfern from the board of directions. The developer announced he would vacate the company when a replacement external CEO with suitable experience and qualifications is appointed. The developer also received a letter from Elliott demanding that an external CEO be appointed in his place and apparently claiming that the shareholders were gradually becoming 'frustrated' at the falling share price and lacked 'confidence' in the company' as it was falling below their high expectations. They appeared to directly attribute this to 'questionable operational and strategic decisions' taken by the board. The developer responded by way of a positive statement making clear that it had neither received any proposal from Elliott nor had any direct meetings with them. In stark contrast to the claims of Elliott, it highlighted the recent company success and presented business accounts evidencing 'record interim profits'v.

What does it mean?

This appears to be part of a long-term trend of minor shareholders at Elliott attempting to push-through changes at large companies in the United Kingdom by using a descending share price to throw its weight around. The highest profile in the firing line have been big-hitters in the pharma sector and big-six supplier SSE in the energy sector.

What impact may it have on the legal profession?

This is the latest situation involving shareholder activists attempting to push forward their own agenda by introducing an external CEO. However, Elliott may face troubled waters if they choose to adopt this course of action. This is an example of changing times and a noticeable cultural boardroom shift which appears to have occurred since the millennium. In a May 2019 survey, PriceWaterhouseCoopers made two discoveries when it reviewed the previous two decades. Firstly, twenty years ago the average time a CEO was in office was eight years. However, the last decade has witnessed an apparent corporate cultural revolution and this average time has declined by 40%. A CEO can now expect a term of only five years. Secondly, PWC found that the corporate world was becoming more challenging for CEOs. In 2018 it found that one fifth or 450 CEOs of the planet's major corporate players had vacated their CEO positions.

Whilst Elliott's ambition to appoint an external CEO appears laudable it carries considerable risk. Firstly, by failing to consider internal candidates the investor risks losing outstanding candidates to other competitors in the market. Elliot and other firms in this unenviable position should be advised to move away from creating uncertainty in the minds of its workforce by ensure transparency in therecruitment process and open communication channels within the organisation.

It will be interesting to see how this story progresses. A significant hurdle facing an incoming potential external CEO would be current staff who were unsuccessful feeling perceptively 'overlooked' and wanting to leave. This challenge is not just one facing the new incoming CEO. To address this, the entire board need to attempt to re-establish a trusting business relationship by openly and honestly communicating with internal unsuccessful candidates during the recruitment process. The new CEO would need to reassure current staff of their value to the company, recognising their hard work in progressing the business to its current position, reassure them that the foreseeable future direction of the organisation is secure and clarify the strategy they have for the organisation. If the new CEO can achieve buy-in from internal so called 'overlooked' candidates it will provide a stronger foundation to retain staff and mitigate against the risk of outstanding candidates from leaving the organisation for a competitor.

The Legists Content Team

ASSESSING FIRMS:

#Kirkland&EllisLLP Latham&Watkins #Vinson&ElkinsLLP PaulWeissRifkind #SidleyAustin #Skadden #Watchell #ClearyGottliebSteen&Hamilton #FreshfieldBrukhausDeringer #Goodwin #HoganLovells #JonesDay #MorganLewisBockius #Ropes&Gray #WeilGotshall&MangesLLP #WilkieFarr&GallagherLLP

SOURCES USED WHEN WRITING THIS ARTICLE:

[1] Guardian - Activist Investor Elliott takes stake in Taylor Wimpey and calls for change - 10 December 2021 - Activist investor Elliott takes stake in Taylor Wimpey and calls for change | Taylor Wimpey | The Guardian

[2] Karlsson, Per-Ola et al - Succeeding the long-serving legend in the corner office - 15 May 2019 - Summer 2019 - Issue 95 - Succeeding the long-serving legend in the corner office (strategy-business.com)

[3] What happens after a legendary CEO departs - Strategy - PriceWaterHouseCoopers - CEO Success study | Strategy& (pwc.com)

[4] Ciampa, Dan - After the Handshake - December 2021 - The Right Way to Bring a New CEO On Board (hbr.org)

[5] Chastain, A et al - How Insider CEOs Succeed - April 2020 - HBR: How insider CEOs succeed - Memphis Business Journal (bizjournals.com)

[6] Keil, Thomas - First impressions can make or break a new CEO - First impressions can make or break a new CEO | LSE Business Review

[7] Hughes, Oliver - Against the tide of shareholder activism - CityAM - 12 February 2019 - Against the tide of shareholder activism (cityam.com)

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