Webinar Summary: Shareholder activism is on record pace: Is your company prepared?

In a recent webinar moderated by Carmen Lilly from S&P Global Market Intelligence, industry experts John Karageorge and Mark Mikullitz discussed the rising trend of shareholder activism, its implications for companies, and best practices for managing potential activist engagements.

Key Takeaways:

Growing Trend in Activism

Shareholder activism has seen a significant increase, with 2023 setting a record for campaigns. The trend is expected to continue into 2024, with 12 fewer campaigns than the previous year, indicating sustained high activity levels.

Activism is not limited to the U.S.; there is notable activity in Canada and Asia-Pacific regions, with emerging markets like Japan becoming more relevant due to economic changes.

Diverse Motivations and Tactics

Activist investors employ various strategies, including traditional shareholder proposals, non-confrontational communications, and proxy fights. The landscape is evolving, with many activists targeting larger companies and employing stealthy tactics like derivatives to build stakes without revealing their intentions until necessary.

Environmental, Social, and Governance (ESG) factors are increasingly influencing activist campaigns, though interest in governance aspects seems to dominate.

Best Practices for Engagement

Companies are encouraged to proactively engage with their shareholders to understand their sentiments and concerns. This includes conducting perception studies and ensuring open lines of communication.

Having an "activist playbook" is crucial. This involves preparing a response strategy, understanding potential vulnerabilities, and establishing a proactive governance framework to mitigate risks associated with activist campaigns.

The importance of a well-prepared management team and board is emphasized, as quick and effective settlements with activists have become more common, reducing the timeline from announcement to resolution.

Looking Ahead

As the landscape shifts, companies must remain vigilant. The emergence of new activist funds and a more vocal shareholder base indicates that traditional approaches may no longer suffice. Firms should anticipate challenges and be ready to adapt their strategies accordingly.

The conversation highlighted the need for companies to continuously assess their performance against peers and keep abreast of shareholder expectations to maintain their competitive edge.

In conclusion, the experts underscored the necessity for companies to be prepared, engaged, and proactive in their approach to shareholder activism, which is poised to remain a significant force in corporate governance.