Key takeaways from The IR Society Breakfast: Activism
We were delighted to be hosted by Georgeson on Wednesday this week for a breakfast panel and Q&A session on Activism. The event was moderated by Anthony Kluk, Head of the Nordic region at Georgeson, with Nick de Bunsen, Director at Teneo, and Michael Henson, an independent investor relations consultant, contributing to an active and informative discussion as guest speakers. Key takeaways were as follows:
- Institutional investors are becoming more actively involved in discussions on strategy and governance.
- Most activists dislike public battles, which can be distracting and expensive for all involved, but instead prefer to drive change behind the scenes. There is a huge undercurrent of activism that does not make the press.
- Activists typically come onto share register because they see value enhancing opportunities and governance failings that can be addressed. Activists are likely to approach other key holders to put pressure on the company to enact change.
- On ESG, the panel agreed that mainstream institutional holders are increasingly feeling forced to become vocal on governance issues whilst environmental and social activism is also on the rise. There has been considerable recent change in the level of interest in ‘ES’ issues and companies are, in turn, responding to ensure their own approach stands up to scrutiny.
- There has also been a rise in M&A activism. Corporates must clearly communicate their strategy and demonstrate consistency in delivering against it. It is important for corporates to understand the views and investment objectives of their top holders by engaging on a regular basis. A lack of consultation with holders can prove disastrous.
- Companies must take a measured approach and engage openly in the early stages of an activist approach, rather than view it as a personal attack on management.
- Boards should be thinking strategically, have a clear plan of action (including a structured programme of investor engagement around governance issues) and be prepared to potentially fight a proxy vote from the moment an activist approaches the company or enters the share register.
- It was asked at what stage should an IRO escalate an activist approach to executive management. A first step before involving the Board may be to set up a meeting between the activist, IRO & CFO to gauge intentions. At the point the CEO becomes involved in meetings, the approach should be escalated to the Board.
- Looking ahead, as many companies approach the three year binding vote on remuneration policy in 2020, we are likely to see increased investor activity and engagement on the issue.
Many thanks to Georgeson, our guest speakers and Orient Capital, our events programme sponsor.
Kate Heseltine, Head of Policy and Communications, The IR Society
Published 14 November, 2019