Highlights from Thomson Reuters IRHub Blog Trends in Activism and Say on Pay.
Executive compensation and board-related issues, including withholding votes for Directors who are members of executive compensation committees, are the top concerns of shareholders. Other corporate governance issues include too much control and limited accountability.
There are two primary types of activists, those interested in governance matters (CalSTRS) who tend to be long-term oriented and those who are decidedly more hostile & aggressive in their tactics to increase shareholder value (Icahn, Relational).
Key attractions for activist investors:
- Undervalued companies – low P/E multiples vs. peers
- Companies going through a major change: CEO/crisis/restructuring
- Controversial CEO – High compensation, outspoken/aggressive comments
- Underperformance – Multiple quarters of missed guidance
- History of accounting irregularities/governance issues
- High levels of cash/assets that can be easily monetized
- Declining investor sentiment
Recommendations for managing your activist risk:
- Understand investor and activist concerns
- Know your shareholder base and gather feedback
Watch the Thomson Reuters webinar: Trends in Shareholder Activism & Say on Pay.
Also watch a second webinar: How to Prepare for and Respond to Rule 14a-8 Shareholder Proposals, sponsored by Blank Rome LLP and the Laurel Hill Advisory Group as they explore the following (look to the right for “Download the Presentation (PDF)” and “View the Recorded Webinar.”
- What are Rule 14a-8 shareholder proposals?
- What are the procedural requirements for submitting a Rule 14a-8 shareholder proposal?
- Which shareholders are likely proponents of Rule 14a-8 shareholder proposals?
- Which companies are likely recipients of Rule 14a-8 shareholder proposals?
- How should a company respond when it receives a Rule 14a-8 shareholder proposal?
- What are the possible grounds for seeking the exclusion of a Rule 14a-8 shareholder proposal?
- When should a company seek a no-action letter to exclude a Rule 14a-8 shareholder proposal?
- What is the process for seeking a no-action letter from the SEC to exclude a Rule 14a-8 shareholder proposal?
- What is the effect of the recent Rule 14a-8 amendments and how do they narrow the “election exclusion” under Rule 14a-8(i)(8) and permit proxy access proposals?
- What were the most popular Rule 14a-8 shareholder proposals last proxy season?
- What steps can companies take to prepare for the possible receipt of Rule 14a-8 shareholder proposals?