October 13, 2015

Activists Seeking Partnerships With Institutional Investors

Institutional investors are playing an increasingly important role in shareholder activist campaigns according to new survey findings from FTI Consulting/Activist Insight. The 2015 survey of 24 engaged activist firms revealed that 70% expect an increase in cooperation or “future partnerships” with institutional investors and pension funds in pursuing their target companies – and all perceive greater acceptance by these institutional investors.

Additional noteworthy findings include:

  • 300 companies worldwide were subjected to public demands in the first half of 2015 – compared with 142 in all of 2010
  • 96% suggest that M&A activism will increase in general
  • Number of board seats sought by activists has almost doubled – from 23 between 2010 and 2012, to 43 from 2013 to present
  • Activists believe that assets allocated to shareholder activism will continue to increase; 86% of surveyed funds expect to engage in new capital-raising over the next 12 months
  • Activists increasingly believe that the US activism market (i.e., competition for targets) is getting crowded, and are turning their sights toward Canada and Europe

In this new post, Wachtell Lipton’s Marty Lipton aims to encourage major institutional investors to recognize the harmful effects on company behavior and their overall portfolio value associated with the antics of activist hedge funds. The memo identifies three new studies by economists and law professors that Marty claims undermine the reliability of what has been characterized by some as “empirical evidence” allegedly supporting “short-termism, attacks by activist hedge funds and shareholder-centric corporate governance.”

See also this recent St. Louis Post Dispatch article wherein NYC Comptroller Scott Stringer expresses his concern about companies being too eager to succumb to activist demands to avoid a proxy fight to the detriment of long-term shareholder value.

Canadian Shareholder Coalition Seeks Universal Proxy

The Canadian Coalition for Good Governance, Canada’s largest shareholder coalition, is calling on companies and dissidents to voluntarily adopt the use of universal proxies in contested director elections pending sought-after corporate and securities laws reforms that would mandate their use. As blogged previously, on the US front, SEC Chair White indicated in June that she had asked the Staff for rulemaking recommendations on universal proxy ballots.

Matt Orsagh on Bank of America CEO/Chair Split

In this podcast, Matt Orsagh, Director of Capital Markets Policy for the CFA Institute, discusses combined and split CEO/Chair roles in the context of Bank of America’s recent shareholder vote, including:

– What was this vote all about?
– Is Bank of America backsliding on corporate governance?
– Are there potential conflicts of interest in combining the roles?
– What checks & balances do companies implement when they combine the roles?
– What is the trend in combining/separating the roles in the US?

– by Randi Val Morrison