Experts say 1,500 recently announced job losses at Suncor Energy Inc. are an example of the type of "collateral damage" that can occur when an activist investor comes calling.

The Calgary-headquartered oil company — which has operations in Canada, the U.S., and internationally — confirmed the job reductions Thursday, less than two months after new CEO Rich Kruger took the reins at Suncor with a mandate to reduce costs and improve the company's lagging financial performance.

Kruger, the former CEO of Imperial Oil Ltd., was lured out of retirement to try to turn Suncor around just a year after U.S.-based Elliott Investment Management — which at the time owned a 3.4 per cent economic interest in Suncor — began aggressively pushing for change at the company, whose share price has lagged its peers in recent years.

Last month, Kruger hinted job reductions could be coming, saying in an interview he would "look hard and long at the work people do" to ensure that everything being done at the company adds value to the bottom line.

Richard Power, associate professor with the Rotman School of Management at the University of Toronto, said those working at Suncor would have been wise to be nervous as soon as it became clear Elliott had their employer in its sights. 

"They'd be naive not to think that they might be affected by this. An activist investor is going to try to rationalize costs, and one of the highest costs you’re going to have is labour costs," said Power.

He added that activist investors target companies they feel are under-performing, and where they believe they have identified a plan to unlock more value.

"I’m certainly not trying to minimize the contribution of employees, but to a large part, the employees are the low-hanging fruit," Power said. 

Cost-cutting is rarely the sole aim of activist investors, most of whom are well-versed in the companies they target and come to the board with expansive proposals for change.

At Suncor, for example, Elliott Investment Management successfully pushed the company to complete a strategic review of the merits of holding onto its Petro-Canada retail chain, and has also called on the company to improve its workplace safety record.

However, there's no denying that employees often get caught in the crossfire when activist investors get involved. There were thousands of job losses at Canadian Pacific Railway Ltd. (now Canadian Pacific Kansas City) after well-known activist Bill Ackman successfully campaigned in 2012 for Hunter Harrison to replace Fred Green as CEO and implement an ambitious cost-cutting plan.

More recently, in the U.S., companies such as Walt Disney Co. and Facebook parent Meta have also announced major layoffs and restructuring plans in the aftermath of public pressure from activists.

Power said companies have a fiduciary duty to their shareholders, and in some cases, an activist investor may be right in pointing out that a company's head count needs to be trimmed in order to maximize profits.

"Remember, they (the activists) have done their homework," he said. "That may be where the costs have to come from."

But Anthony Schein, director of shareholder advocacy with the Shareholder Association for Research and Education (SHARE), said companies are accountable to other stakeholders, not just shareholders.

"We at SHARE certainly take that perspective that of course, maximizing profit is an obligation of corporate directors and management. But it's not the only obligation either," Schein said.

He added that activist investing can be risky, as it can sacrifice long-term value — and vital human resources — for short-term share price appreciation.

"We've seen over and over again that when companies aren't paying attention to their people and how they manage and develop their people, then we see skills gaps, labour shortages, and safety risks," Schein said.

"So much of what a company like Suncor has is its know-how. That comes from people, and there's no way of getting around that at a company."

Suncor said Thursday it is committed to treating its employees with dignity and respect throughout what will inevitably be a difficult process.

The company also emphasized it will not make any cuts that could affect worker safety.