Have Your Say
Jan Zeber explores the progress made by activist shareholders in recent years, questioning the extent to which
City law firms should participate in the process.
A
n activist shareholder is, according to
Investopedia, ‘a person who attempts
to use his or her rights as a shareholder of a
publicly-traded corporation to bring about social change’. However, this is not strictly true
because, whilst the practice started in 1970s
with Interfaith Centre on Corporate Responsibility, a coalition of religious investors with an
aim of lobbying for socially responsible changes, these days most activist investors push for
governance changes they think will benefit the
company. In practice, this means either ‘proxy
contests’ – campaigns by dissident shareholders
at AGM’s to achieve their desired resolutions
(often amounting to replacement of undesirable
directors) – or other forms of in-house wrangling. Sounds pretty complicated; better send in
the lawyers.
Occasionally we do get big charitable organisations like The Humane Society aggressively purchasing shares in major fast food
chains in order to lobby for higher standards of
animal treatment. But two prominent activists, in US based companies.
Carl Icahn and David Einhorn, lead so called
But that does not mean that UK firms
‘activist hedge-funds’ trying to push for various should stop paying attention, especially in the
changes in hope of improving the company’s face of constant frustration at big bonuses.
market value. This was evident last month when Last year, Aviva Group CEO Andrew Moss was
Einhorn sued Apple in an attempt to force the forced to resign after an embarrassing defeat on
company to redistribute the $137bn it’s current- executive pay at the company’s 2012 AGM. The
ly sitting on, as dividends and
former Trinity Mirror Group,
investments, calling Apple’s “It’s about levelling the publisher of the Daily
monetary policy “depression the playing field, and Mirror and CEO Sly Bailey
era mentality”.
also resigned straight after the
ensuring the fight is AGM, when the shareholder’s
Regardless of motives,
this is an untapped market for
fair, or at the very discontent became too much
legal services. Only one US
to conceal. Though it may
least, legal.”
firm, Olshan, has an ‘activist
seem like a company political
practice’ specialised in navigating an unwelcom- power struggle, legal advice is never a bad idea,
ing landscape of proxy rules and assessments and that goes for both sides.
of company governance profiles, identifying
Investors are becoming more and more
opportunities for change. The UK remains un- frustrated, and are demanding their voice to be
occupied, primarily due to the fact that activist heard. Shareholder associations started to spring
investing is still a primarily US phenomenon, up in the UK (something along the lines of ‘inwith 60% of contested proxy votes taking place vestor trade unions’), the largest of which is »
DICTA
2013 | 45