Activists vs investors

Shareholder activists may have institutional investors to thank after concluding one of their most successful years to date in both returns and inflows, according to a new study released by global business advisory firm, FTI Consulting.

The 2015 shareholder activist landscape: an institutional investor perspective found that a significant majority (76 per cent) of investors view the growth of shareholder activism in recent years as having a favourable impact on the market.

However, when asked about the potential negative effects of shareholder activism, a majority of investors expressed concerns over short-term gains at the expense of long-term shareholder value and activists’ ability to have a detrimental effect on a company’s long-term strategic approach.

Responding to views on the direct effects of shareholder activism, 84 per cent of institutions polled believe that shareholder activism produces positive results for target companies.

The survey revealed not only widespread belief in the benefits of activism in general amongst institutions, but strong support (over 75 per cent) for the increase of “US style” shareholder activism in Europe and Asia.  

When ranking the top benefits of activism as it contributes to shareholder value, institutions were more than twice as likely to cite activists as a catalyst for change than forcing a capital event such as a sale, split or returning cash to shareholders.

 “Shareholder activists have been increasingly successful in gaining backing from institutional investors, however this does not necessarily translate into unequivocal support. Institutions welcome activists for the dialogue they provoke with shareholders, but are less predisposed to supporting radical transformations,” said Steven Balet, managing director, strategic communications segment at FTI Consulting.

“Boards and management teams should seek to proactively defend against possible activism by regularly assessing their vulnerabilities and communicating their strategy to shareholders,” Balet added.

To read the full report, click here.