The phenomenon of shareholder activism has been building extensively for years and with an increasing impact. As UK, European & US shareholder voices continue to get louder and as activists gain more access and exert more influence, reluctant corporates, brands and boards can no longer ignore them but often search for new ways to stymie, deny or deliberately & directly resist such critical comments. Contributors Marc Stigter & Cary Cooper Boards That Dare: How to Future-proof Today’s Corporate Boards.
Things took a darker turn for the terms and territory of this shareholders versus corporates and/or executive boards stand-off with the Securities Exchange Commission (SEC) siding with ‘big oil’ with the precedent of a recent “climate change exemption” to deny Environmental, Social and Governance (ESG) activism shareholders any objection or their legitimate (voting) voice, let alone influence on the future investment decisions. Climate change is likely to the biggest grit in the shareholder democracy oyster.
Boards that Dare – the new book from Marc Stigter & Cary Cooper – reveals that more sensible C21st boards, corporates and brands tend to welcome the market intelligence and consumer/shareholder guidance or feedback that activism generates for free. This responsiveness is also often good business sense since, even though shareholder activists are a relatively small group, they’ve enjoyed a higher rate of asset growth than hedge funds and attracted new partnerships with traditional investors. As a result, they have both the capital and the leverage to continue engaging large cap companies (according to McKinsey) and brands.
Increasingly issues of climate change, social, health & environmental impacts generally plus gender & ethnic diversity drive this type of active shareholder questioning of the strategic direction and investment decisions of quoted corporates.
Obviously, shareholder activism is a key way in which shareholders can influence a corporation’s behaviour by exercising their rights as owners. It is designed to deter poor governance that might pose a threat to the longevity or profitability of the companies that said shareholders invest in.
There are different motivations for such shareholder activism. The old-school traditional/capitalist Economic activism – where investors target underperforming companies, taking an equity stake to agitate for change and unlock shareholder value – enjoys widespread acceptance compared to the unpopularity of the Environmental, Social and Governance (ESG) activism variety of investors who place pressure on companies to improve their performance in a range of non-financial measurements.
Shareholder activists are filing record numbers of environmental resolutions. Many boards have resisted directly and indirectly. For example, the Exxon Mobil board has continued to resolutely oppose shareholder motions on increased acknowledgement of climate change issues.
Since the SEC is siding against activist shareholders with these chilling “climate change exemptions”, London Stock Exchange authorities will struggle to continue to retain the fig leaf of their “shareholder democracy” let alone resist against the NYSE for long if it wishes to retain its position, geographic competitive advantage & reputation as an attractive place for global investors to trade and/or corporations to float/transact their shares.
Boards That Dare: How to Future-proof Today’s Corporate Boards
authors Marc Stigter & Cary Cooper