Preparing for shareholder activism



The rising tide in shareholder and stakeholder activism in Australia is likely to continue to dominate boardroom discussions in the next year, so directors must ensure they are prepared.

In an article entitled Shareholder Engagement in the Age of Activism, Sally Freeman GAICD, national managing partner, risk consulting at KPMG, said directors and the board must ensure they proactively manage stakeholder activism so they are prepared for threats before they happen.

“Activist investors are looking for opportunities to disrupt and are challenging boards and executives across areas of governance, strategy, operations and sustainability – all in the name of maximising shareholder value,” Freeman said.

Freeman added that even in the US, where activism has been more commonplace, companies are often caught off guard, and respond to campaigns as they occur, rather than being ahead of them. Australian companies must learn from those lessons and take action to pre-empt activism and prepare for threats before they happen, she said.

“In order to be truly strategic, boards and management should be addressing the issues that currently attract activists and trying to anticipate the likely issues of the future. Building strong relationships with shareholders is a critical part of the solution,” she added.

Highlighting potential risk areas where shareholder activism can occur, Freeman focuses on different ends of the investor spectrum and pinpoints red flags that may help directors understand the activists’ agenda.

Of particular importance, says Freeman, is the board’s role in overseeing the development and implementation of the stakeholder engagement framework.

For a full copy of the article, click here.