08 March 2019
ICSA and Morrow Sodoli collaborate to discuss Shareholder Activism and its impact
The ICSA was thrilled to collaborate with Morrow Sodoli to host an event titled ‘Shareholder activism: Trends for 2019’ at 10-11 Carlton House Terrace, London on 24 January.
Invited guests were treated to a lively discussion following a presentation by LBS’s Professor of Finance, Alex Edmans on 'The Effects of Shareholder Activism' and a panel discussion on 'Activist investors: Best practices, strategies and their impact on the Board' comprised of: Miranda Craig, Deputy Company Secretary, Legal, Sage; Alex Edmans, Professor of Finance, London Business School-Adrienne Monley, Head of Investment Stewardship – Europe, Vanguard; Dr. Julia Mundy, Principal Lecturer, Faculty of Business, University of Greenwich; David Shammai, Global Head of Corporate Governance, Morrow Sodali.
Last year showed record levels of shareholder activism across a number of different markets and it appears that activism is a growing concern across all sectors. Regardless of their intentions, the disruptive impact of an activist investor on a company can be enormous. Boards therefore, must regularly review their financial and governance vulnerabilities to minimize their exposure to activists.
The event speakers discussed how shareholders are not necessarily the enemy, seeking a bigger slice of the pie. Instead, the evidence shows that their impact can often be as allies, aiming to grow the pie, leading to wider benefits. This is particularly the case where activism has been ESG integrated.
Governance plays a key role in the future of shareholder activism; activist funds are increasingly running campaigns that are governance-focused as they recognise the need to build bridges. If boards understand the rationale of activists, they are able to prepare for their impact.
Delegates learned how a board that is thoughtfully composed can protect companies against external activists. By ensuring your board is appropriately composed for your market and stage of development and by avoiding gaps around technology and digital innovation, shareholder activism can be dealt with in an effective way.
The panel concluded that 2019 is likely to see greater collaboration between investors and companies, ESG integrated activism and increasingly sophisticated company responses.