Shareholder Activism: What if you’re in the hot seat?
27 August 2021
Activism is rising globally, and when it comes to shareholder activism, the stakes are clearly high: growth strategies could be thwarted, sustainability plans challenged, corporate reputation dented, and even control in the Boardroom broken.
It is against this backdrop that Klareco’s Financial Communications team hosted a webinar game “Shareholder Activism: What if you’re in the hot seat?” this month, taking participants through a dynamic simulation of how a fictitious Singapore-based conglomerate named 168 Peak Holdings navigated the challenges of shareholder activism.
Participants contemplated responses to fictitious scenarios, such as being publicly attacked by an activist shareholder who is in cahoots with a disgruntled member of a family holding a significant stake in a company; splashing the headlines on international media despite only providing an off-the-record background comment; and addressing demands to change board composition.
Although fictitious, these scenarios are representative of shareholder activism today, which also stems from perceived ineffectiveness in governance and leadership.
Here are four key takeaways from the webinar to keep in mind when faced with an unexpected wave of shareholder activism:
Shareholder activism isn’t always a “dirty word”
It is important to differentiate between short-term activists and long-term activists. While companies should not be overly swayed by short-term activists derailing their strategy, long-term activists can signal valuable opportunities and gaps which the management may not have considered or otherwise overlooked.
Shareholder activism need not always sneak in “like a thief in the night”
While some shareholder activism may inevitably come as a surprise, it is important for a company to proactively monitor and contain shareholder activism. This could mean, for example, conducting a regular analysis for threats, and planning responses to potential threats. Companies should also track their shareholder profile regularly to identify their shareholder base, and develop a strong sensing of investor sentiment to mitigate any growing dissent.
Begin with a collaborative approach
Because shareholder activists can be relentless in their cause, it is important to approach your opponent collaboratively: before jumping to conclusions, find out everything you can about the shareholder activist and their grievances. Rather than adopting a “hide” or “avoid” strategy, build engagement as avoiding the problem will only make it bigger: activists do not typically shy away from launching overt public campaigns.
Stay the course
Navigating the management and Board responsibilities’ for steering the company in the best direction possible, and activist views, can be a difficult balancing act. While some Board views from activists may have merit, companies should not blindly succumb to them. Staying the course requires the company to have strong relationships with investors that are well aligned with the Board and management. These strong relationships could in turn help them stave off unwanted shareholder activists and build greater trust.
We hope you enjoyed the session as much as we enjoyed presenting it to you. We will also be happy to run such sessions on an individual basis with your wider company team – just drop us an email at firstname.lastname@example.org and we’ll get back to you!