Activist interventions are being increasingly resolved by way of settlement agreements, with 3% of activist interventions in 2000 having resulted in a settlement agreement versus 16% in 2011. In light of this emerging trend, the Columbia Business School recently published a paper, Dancing with Activists, in which the authors sought to provide the first systematic analysis of the drivers, nature, and consequences of such settlements. The authors identified 4 main drivers of settlement agreements: (1) the activist’s stake; (2) market reaction to a SEC Schedule 13(d) filing; (3) settlements in past engagements; and (4) past firm performance.… Continue Reading
Members of Norton Rose Fulbright’s Canadian Special Situations team have weighed in on shareholder activism in Canada with an article in the Spring Edition of Ethical Boardroom Magazine. The article, written by Trevor Zeyl (assisted by Joe Bricker), offers insights on shareholder activism in Canada in the past year, and some predictions for 2017 and beyond. The Spring Edition of Ethical Boardroom can be viewed here (free subscription required): https://ethicalboardroom.com/ethical-boardroom-spring-2017/.
In a dispute between three petitioning directors (the Petitioners) and three requisitioning shareholders (two of whom were also directors) (the Requisitioning Shareholders) of Photon Control Inc. (Photon) (TSX-V: PHO), the Petitioners asked the British Columbia Supreme Court (the Court) to exercise its powers under the Business Corporations Act (British Columbia) (the Act) to intervene in the calling, holding and conduct of a shareholders’ meeting that the Requisitioning Shareholders had requisitioned under the Act. The Court dismissed the petition. In addition, the Court also ruled that the chair of the requisitioned meeting did not have … Continue Reading
In a corporate directors survey (the Survey) entitled “The swinging pendulum: Board governance in the age of shareholder empowerment”, PricewaterhouseCoopers LLP (PwC) presents current trends in investor influence and their impact on governance practices of boards and management teams.
Conducted amongst 884 company directors in the summer of 2016 with respondents representing over 24 industries, the Survey highlights the increasing influence of investors and board sentiment in this “new age of shareholder empowerment”.
When recruiting new board members, investor recommendations appear to carry increasing weight. The Survey notes that there has been an … Continue Reading
A recent article from IR Magazine, “Governance crucial factor for nine in ten Canadian investors” (the Article), highlights just how much emphasis Canadian investors place on good corporate governance. Canadian companies would be smart to take heed and ensure their corporate governance is in line with accepted good practices. The Article reports that, of the members of the Canadian buy side interviewed as part of the “IR Magazine Investor Perception Study – Canada 2016”, 86% cite corporate governance as being a crucial factor when making investment decisions.
While corporate governance is a broad term, the respondents indicate that … Continue Reading
As a result of the rising tide of shareholder activism in Canada, a number of defensive tactics have been developed by corporate management. The newest innovation in management’s arsenal is the activist investor ban—an agreement between an issuer and a purchaser that restricts the purchaser from transferring its shares to activist investors.
Activist investor bans have recently become the norm in the realm of pharmaceutical mergers and acquisitions. Last month, for example, the Canadian drug maker Concordia Healthcare Corp. agreed to issue a 14% equity stake to a private equity firm, but not before putting an activist investor ban … Continue Reading
Considering the role of institutional investors in influencing corporate governance is critical to effective corporate decision making. Broadly, dissatisfied institutional investors choosing to act can do one of the following: (a) intervene with management, either cooperatively or uncooperatively as dissident shareholders, or (b) exit by selling their shares. Many theories have been put forward to explain investor conduct, but who better explain the rationale behind it than investors themselves? In a new article entitled Behind the Scenes: The Corporate Governance Preferences of Institutional Investors (Behind the Scenes), the authors survey 143 institutional investors worldwide to find out … Continue Reading
In collaboration with The Boston Consulting Group and RBC Capital Markets, our Canadian Special Situations Team has released a paper offering a fresh perspective on defensive strategies addressing the spectre of shareholder activism. The paper argues that in developing a sound defense, good governance practices are vital, but should not be relied upon as a company’s sole fortification. The most effective defense is to create sustainable shareholder value. This value creation should be facilitated not by enhancements in oversights, controls and disclosure, but rather through a board’s more active engagement with management, strengthened by a more fulsome understanding of the … Continue Reading
A corollary to the trend of rising shareholder activism is the increasing frequency with which target companies are facing multiple activist campaigns. Companies that have successfully defended activist campaigns in the past are not free to rest on their laurels – if the same issues persist, future attacks may be on the horizon.
The Wall Street Journal reports that 39 companies have dealt with more than one shareholder activist over the past year – a 95% increase since 2011. Companies that are underperforming seem to be a breeding ground for multiple shareholder activist activity, but there do not seem to … Continue Reading
According to recent studies, the rate of successful shareholder activism is on the rise. While historically high when compared to the relative ownership percentage of those campaigning, new data from North America and Europe demonstrates a climbing success rate for activist campaigns.
Studies that measure shareholder activism often organize their success-rate analysis by either a success-per-shareholder-demand variable, which measures the amount of successful changes to a company against the amount of total activist demands, or based on overall “engagement outcomes”, which measure success against the amount of total activist campaigns (which may contain multiple demands). Both indicators attempt to … Continue Reading
The 2015 proxy season is fast approaching, PwC and Broadridge released a quarterly research report which reviews proxy related data from 4,113 shareholder meetings
held between January 1 and June 30, 2014 and highlights several themes and trends that may inform how shareholders and companies will interact on four key issues:
Director Elections: Director elections continue to attract widespread voting, with 93% of elections at large companies garnering votes between 90-100%. In contrast, only 75% of voted shares were cast in the 90-100% range for small-cap firms. Moreover, of the 22,554 directors up for election, roughly 5% failed to … Continue Reading
Kingsdale Shareholder Services has released its 2014 Proxy Season Review. In its report, Kingsdale discusses trends observed in 2014, predictions for the future, and gives its key recommendations for companies in the Canadian marketplace. In reviewing 2014 and comparing it to the previous year, Kingsdale observes:
- By the numbers – the total number of proxy contests observed in 2014 remained at the elevated level seen beginning in 2008, but was down slightly from 2013. Kingsdale suggests a number of factors for the relative decline, including stronger capital markets which have helped to mask under-performers’ deficiencies, the implementation of structural