Global Shareholders: The Shareholder Perspective
A Conversation Between Christopher P. Skroupa, Skytop Editor-in-Chief, and Eleazer Klein, Partner, chair of the M&A and Securities Group, co-chair of the global Shareholder Activism Group, member of the Executive Committee at Schulte Roth & Zabel LLP / February 8th, 2022
Ele Klein is a Partner, chair of the M&A and Securities Group, co-chair of the global Shareholder Activism Group and serves as a member of the firm’s Executive Committee at Schulte Roth & Zabel LLP. He practices in the areas of shareholder activism, mergers and acquisitions, securities law and regulatory compliance. He represents activists, investment banks and companies in matters ranging from corporate governance and control to proxy contests and defensive strategies. His recent representations have included representing Engine No. 1 in ExxonMobil; Trian Fund Management in multiple matters; Elliott Management in Marathon Petroleum; Akamai Technologies and Hess Corp.; and JANA Partners in Jack in the Box.
Ele works on numerous activist campaigns and related transactions every year for some of the largest private investment groups and investment banks in the United States and abroad. In addition, he advises on private investments in public equity (PIPEs), initial public offerings and secondary offerings, venture capital financing, and indenture defaults and interpretation, and he counsels clients in the regulatory areas of insider trading, short selling, Sections 13 and 16, Rule 144, insider trading and Regulation M/Rule 105.
Ele is recognized as a leading lawyer in Chambers USA, The Legal 500 US, New York Super Lawyers – New York Metro top 100 and Super Lawyers Business Edition.
Ele received his J.D. from Yale Law School, where he was senior editor on the Yale Law Journal.
Christopher Skroupa: Over the last decade, the composition of shareholders has changed. Today shareholders are from all parts of the globe as opposed to being clustered regionally. How has this affected the governance of public companies?
Eleazer Klein: Shareholders have changed in two main ways. Globalization as well as institutionalization. Big institutional holdings have had a significant impact on governance as they have pushed for changes in areas such as performance, governance and ESG issues. Global shareholders are becoming equally sophisticated on many of the issues and bring certain perspectives to the market from their international experience.
Christopher: The role of activist investors seems to have gone global. Is there an emerging path that shareholder activists are moving down? What are they engaging in? Do you see them moving into non-financial qualifiers of long term value such as ESG?
Eleazer: Activism has gone global over the past 5 plus years. U.S. investors in particular have become active in the UK, Europe, Japan and other jurisdictions, but foreign investors have also been involved in the U.S. While there used to be distinct tool kits used by activists, depending on the jurisdiction, we have seen a blurring on these lines as approaches are becoming more global. And there is no question that ESG is an ever increasing part of the activist landscape as highlighted by our recent campaign for Engine NO.1 at ExxonMobil.
Christopher: What are your thoughts about dual shares and are they back to stay?
Eleazer: Dual shares have always been criticized as being an unfair tool and poor governance. While there may be a possible place for them with certain companies, even then there must be a sunset provision doing away with it rapidly after an IPO. But like them or not, they will be a part of the landscape unless exchanges refuse to list them.
Christopher: Boards and management seem to have more on them today than ever. Are global shareholders creating a new standard for the performance of boards and management?
Eleazer: Clearly boards and management are under more scrutiny and being held more accountable. That is a good thing for the markets. They should be required to perform and deliver. And global shareholders are more used to holding companies accountable with tools available in many jurisdictions. It may not be a new standard, but it is a higher standard.
Christopher: Could you summarize what you feel are the most significant changes to public companies created through globalization of shareholders?
Eleazer: Companies need to be more responsive to all shareholders, and with globalization companies need to be savvy in how to interact with different constituencies and cultures. Globalization has also introduced tools from different countries, such as a more public approach, into countries that had not experienced this previously.