Not so long ago, the formula for activist investing was simple: Buy a 5% stake and file a 13-D, blasting the company's management for its poor performance and excess compensation. Raise hell until they put the company up for sale and a private equity firm takes advantage of the company's low stock price. Then cash out, having made yourself and your fellow shareholders rich. What if the company headed into the toilet after it was taken private? Not your problem.

Those days are long gone. With the private equity business the quietest it's been in a long time, there are no third parties ready to scoop up bargain-priced stocks after activist shareholders push them to the auction block. Increasingly, activist shareholders are having to stick around for the long-term, pushing for improved corporate governance and better management as a way to increase returns.

If the latest personal attacks in the presidential election are too softball for your taste, you may want to take a look at the efforts of Steak n Shake's (NYSE: SNS) entrenched and poorly-performing management to retain their positions in the face of attacks by activist investor Sardar Biglari.

The company has put together a handy dandy Power Point presentation designed to convince investors that they're actually doing a great job -- stock price be darned. I'll summarize it this way: "Brownie, we're doing a heck of a job and, although we never purchase stock and have sold shares frequently in the past, our strategy that has failed miserably will actually start to work soon. If not, we'll just have to survive on our bloated salaries and undeserved bonuses."

Not to be outdone, Biglari responded with an on-point letter, skewering the company's propaganda:

Over the last decade -- an ample period of time to judge long-term performance -- the members of the current board have had their chance to amass value for you. They have failed . . . In quantifiable terms, during the last ten years they have spent approximately $566 million in capital, yet operating profit declined and negative shareholder returns were produced! An examination of the figures reveals that the stock price in 1998 rose as high as $18.75 but now sits at $7.65 for a loss of almost 60%, notwithstanding the time value of money . . ."

Biglari closed by saying that he is "confident of winning" his battle for control of the company, and I'm inclined to agree. No one in their right mind would vote to keep the current board in place given its track record.

Activist investor Sardar Biglari of the Lion Fund, who owns more than 8% of struggling restaurateur Steak n' Shake (NYSE: SNS), has been waging a campaign to gain representation on the company's board and increase shareholder value.

Today, the company decided to try the carrot-and-stick approach to avoiding a proxy fight. First the carrot: the company sent Biglari a letter offering him two seats on the company's board by expanding it in size from nine to 11 members.

The letter also stated: We also want to inform you the Board recently amended the Company's By-laws in several respects. We have filed a current report on Form 8-K with the Securities and Exchange Commission today, Thursday, January 31, 2008, and as a courtesy to you, we have enclosed a copy of that Form 8-K.

The amendment should tell shareholders all they need to know about this management's motivations. The 8-K amended the company's bylaws to require 80% of the company's voting shares to request a shareholder meeting -- before, only 25% we required.

It's clear that the company's management isn't eager to be held accountable for its failures, and this change to the bylaws is a pathetic effort to further insulate entrenched executives and directors.

Mr. Biglari's website, www.enhancesteaknshake.com, contains a ton of information about his views on the company.

Given Western Sizzlin' (OTC BB: WSZL) CEO Sardar Biglari credit for trying. In an effort to win board seats at Steak n' Shake (NASDAQ: SNS), he has taken out a billboard along the highway in Indiana, urging shareholders to vote for him and Philip Cooley, his business partner and fellow board hopeful.

The billboard directors drivers (Investors?) to his cleverly-named www.enhancesteaknshake.com -- Let's hope Biglari doesn't have ideas for an ad campaign for the restaurant chain.

But in a very short time, Biglari has built a strong track record investing in restaurant companies. Most famously, his agitations at Friendly's (which also included a billboard campaign) led to the company's sale to a private equity firm.