Shareholder Engagement, After the Storm: The Changing Nature of Activism and Engagement
A Conversation Between Christopher P. Skroupa, Skytop Editor-in-Chief and the Executive Team at CMi2i / January 20th, 2022
Part Three of a Three Part Series
Nancy Hameni: Nancy has over 9 years of experience in Investor Relations, shareholder communications, corporate governance, transactional services and activist situations. She has extensive experience in investor engagement services in the UK, France and Benelux among others. She worked on over 350 meetings and cross-border assignments and advised numerous corporate clients on high profile shareholders campaigns, successfully securing the desired outcome and support. Nancy who is a French native, holds a B.A. in Law & Business and a LPC (Legal Practice Course/ Solicitor qualification) from the University of Law in London.
Christopher Skroupa: Nancy, when we talk about collaborative ongoing engagement, what defines that for you? What do you think of the changing nature of engagement? What do you think investors want to see? And how do you think companies want to respond?
Nancy Hameni: If we’re talking about engagement from the proxy perspective and point of view, it would be that corporate issuers engage with shareholders regularly. Whether that’s announcements, strategic planning or yearly meetings like what we saw pre-COVID-19. Not just to check boxes, but to let shareholders actually see progress on promises that were made and to see the company is following through and not just blowing smoke.
Christopher: What are the top issues on the proxy agenda these days?
Nancy: Shareholders are frustrated with executive bonuses during the pandemic, especially when companies promised not to give them out and exclusively focus on keeping the company afloat during this crisis. And the government aid that companies have gotten have been going towards these bonuses, which obviously makes many shareholders frustrated. Secondly, shareholder activism in the UK saw a 40% spike during 2020. Not necessarily what we think of typical shareholder activism, but existing shareholders wanting to get things in motion by way of not being satisfied with goals or current management. One example is in France, where shareholders have actively criticized how their company has handled SDG and ESG. Not only should we expect ESG and climate specifically to be big during this time, but we should expect the trend of shareholders actively pushing for the companies to better themselves in areas in which they lack. Also we should expect shareholders to encourage fellow shareholders to get involved to get things rolling and endorse certain resolutions.
Christopher: It’ll be interesting to see how these things play out on the ESG stage in America with our former President Donald Trump being so anti-climate and how President Biden proceeds on dealing with climate change. It’ll also be interesting to see how qualified these shareholders who come forward are? Any thoughts on that?
Nancy: Whether in the United States or international, companies will have to address the issue of climate change to stay relevant, the problem being that they often implement policies that don’t work due to lack of due diligence. Like companies choosing ESG targets that don’t fit or are irrelevant to their industry. Shareholders really just want clarity in terms of these goals, whether U.S. or Asian or wherever in the world. People are going to start to demand SGD from the companies they have invested in, whether they already have some or not. And those companies that don’t implement these goals will see serious backlash on the back end.
Christopher: What should companies not do if angry shareholders are knocking on their door?
Nancy: Don’t ignore it, it’ll become a larger and larger problem. Don’t assume you have the support of your shareholder base. Most of the time you know why they’re here, a governance or strategy issue. You need to at least have these annual meetings with shareholders where they air their grievances because you don’t know who else could be sharing that view or criticism. Another thing you shouldn’t do in approaching activism in shareholders is using data strategy, since it’s rarely a problem that needs a quantitative solution. Companies should also have health checks, where they know their strengths and weaknesses. This and having a cupboard or back up plan in case you run into problems.
Christopher: Do you believe most takeovers happen hostilely? Or does it just come with that persona that any takeover has?
Nancy: Well, you have several kinds of active shareholders, one who genuinely wants to help the company grow with no ulterior motive, and one who has felt unheard of for some time and is fed-up with governance and management. For them, the only logical next step is to take their frustration into a proxy fight. The unheard shareholder, if left ignored, will build an agenda that reflects their hostility in not being considered. Even if you meet with them and try to discuss possible solutions, the tone is that they are out for blood and the solution to overcome these investors is giving them what they want or getting them chased away by the company.
Christopher: We are curious to see how the integration of ESG and institutional shareholder engagement will continue to impact proxy seasons ahead.