Shareholder Activism Is Evolving. Your Strategy Must, Too

Shareholder activism strategy

When you have shareholders, you are accountable. We don’t foresee any glasses dropping in shock at this revelation, but nonetheless, it’s a reality for every company – doubly so for listed ones.

If company management does not prove itself quite up to the task of running and growing the company, or isn’t communicating its efforts well enough, sooner or later, there will be shareholder activists to contend with. Depending on the situation, they might try to nudge things towards the direction they believe is best for their investment, or even try and take matters into their own hands.

As widespread as shareholder activism is, it’s interesting how many companies simply don’t seem to take it into account – or, if they do, have no set plan for dealing with it.

According to research by consultancy Alix Partners, only 10 percent of company executives who were asked are confident they could stand up to activists. And even though a significant majority of executives are concerned about the rise of shareholder activism, more than half of them have no plans in place to go up against it.

The research involved listed companies across the European Union. Executives interviewed for the report pointed out that technology makes it a lot easier for activists to catch them unawares. “These days it is easier to stir up activism. Like-minded groups are instantly connected and able to mobilise,” they said.

That’s in Europe, which, alongside with the US, has historically been a market where shareholder activism flourishes. But activism has been on the rise in Asia too, as noted by aptly-named consulting firm Activist Insight and an in-depth report on Nikkei Asian Review.

According to Activist Insight, investor activism climbed nearly 20 percent in Asia in 2018 – even surpassing Europe when it comes to activist activity. And while the consultancy has observed a relatively quieter first quarter in 2019, this is not the time for management to get complacent.

Join the Race

It’s not only activist shareholders who can play the instant communication game. Company management and investor relations professionals must be on top of the situation, using the resources at their disposal. Not only can they confront activism when it happens, they can also prevent it from arising through transparent communication and careful management.

Market specialists, from PwC to Harvard, have outlined ways in which management can be ready for activists. We have written before about some best practices for investor relations ourselves: be transparent. Be open to contact. Cultivate and nurture valuable relationships.

Using tech platforms and tools, you can tell your company’s story and make sure it reaches the people you want. You can contact your shareholders anywhere, at any time, keeping them updated with relevant information and disclosures. You can keep an ear to the ground about what people are saying about your company, whether that’s stakeholders, media, or analysts.

When a challenge does come, being ready to face it head-on can yield more value for all stakeholders.

Do you wonder which platform can help you stay on top of such challenges? Sign up for a FREE account on Smartkarma’s Corporate Solutions, a brand-new range of services for C-Suite and Investor Relations personnel of listed companies that’s been designed to help IR professionals establish and maintain valuable connections to the investment and analyst communities.

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