September 22, 2015

The Evolving Retail Investor

On the heels of the recent Dupont-Trian proxy fight, wherein the vote of Dupont’s sizeable retail investor base proved to be decisive, this Brunswick Group report focuses on that scarcely evaluated, yet increasingly important, investor group – retail investors – concerning their views on activism. Importantly, companies, which have typically relied on their retail investors to support management, should understand the apparent trend toward retail investors’ familiarity and potential alignment with activist views.

Brunswick’s recent survey of just over 800 active retail investors revealed that the majority:

– Are aware of shareholder activism
– Think there needs to be a greater focus on shareholder value in corporate America
– Believe activists add long-term value
– Want to be informed during the campaign, and most trust third-party sources, and
– Are likely to vote if they care about an issue

While shareholder engagement has become mainstream, the focus of that engagement for most companies – outside of the annual meeting context – has been virtually exclusively on their major institutional investors. The results of this survey should prompt companies to consider broadening their comprehensive engagement efforts to actively include their retail investors.

Similarly, active retail investors should make a concerted effort to express their views in a mature and constructive fashion, i.e., as has been the case with many institutional investors, they should seek to learn how to effectively engage with companies, and only resort to confrontational tactics after other, more constructive approaches have failed.

Activism Trends & Preparedness

This recent Sidley article highlights key activism trends and corresponding response preparedness tips, which include the board keeping an open mind and evaluating each activist situation individually rather than preparing a semi-rote response playbook, as is frequently suggested.

Key stats include:

– Activists targeted more than 200 companies in 2014 – compared to about 120 in 2010.
– Activist funds now have more than $200 billion in assets under management and, as a class, they outperformed all other hedge fund strategies in 2014.
– Activists had a 73% success rate last year in placing their director nominees on targeted company boards – either through full-blown proxy contests or negotiated settlements.
– Activists won 197 board seats and were instrumental in replacing 19 CEOs in 2014.

See also this WSJ article noting an uptick in business school student interest in activism.

More on “The Mentor Blog”

We continue to post new items daily on our blog – “The Mentor Blog” – for members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

– The Many Benefits of Institutional Investor Engagement
– Building Effective Boards: Emerging Trends
– Cybersecurity: (More) Guidance for Directors
– Most Filers Adopt New COSO Internal Control Framework
– Shareholder Activism: Guidance for CFOs


– by Randi Val Morrison