They may be making less noise, but activist investors are still a major force for public companies to deal with.
In a new report titled Proxy Season Review 2017
, shareholder services firm Kingsdale Advisors said that “activism is a persistent investment style and a continued threat to public companies,” reported the Financial Post
The firm found that public proxy contests have been declining: from 55 in 2015 and 33 in 2016, there have been only 20 public contests so far this year. In Canada, it’s estimated that only one third of activist actions go public. According to Kingsdale, this reflects the trend of companies and activists working “more constructively behind the scenes” toward productive resolutions “while saving public reputations and corporate funds.”
Activists have racked up a decent number of wins from their public actions, however, achieving “some or all of their objectives” in 70% of the fights waged this year; they managed 33% in 2016 and 55% in 2015. The report said this was due to several factors, including activists’ increased scrutiny and target-screening at the front end. A strengthened link between “properly structured activist campaigns” and gaining traction with the proxy advisors, as well as “generating supportive vote recommendations,” also contributed to the improved win-loss record.
Activists are expected to continue focusing on environmental, social, and governance (ESG) issues. There have been 33 ESG proposals tallied this year — a third of which involved climate change — compared to 27 in 2016 and 20 in 2015, respectively. According to Kingsdale, these will be driven by an increasing belief in the correlation between long-term sustainability and long-term results, as well as the wealth accumulating among a new generation of responsible investors.
There’s also an expected trend toward enhanced disclosure covering issues such as corporate social responsibility. Since low voter turnout could indicate “poor governance and shareholder engagement,” that issue could also attract more attention down the line.
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