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As shareholders both large and small seek to exert their influence on companies, Saul Sender, partner in the corporate group at Mishcon de Reya, examines the growth of shareholder activism in the UK.
An NGO lobbying an oil company to stop it exploring the arctic tundra and a New York hedge fund advocating a change of management at an investment fund would seem, at first glance, to be strange bed fellows—yet both of them are shareholder activists. The increase of shareholder activism in the UK has been widely reported and this is partly due to the term ‘shareholder activism’ being applied to such a wide range of parties.
There are a number of factors behind the growth of shareholder activism. As the UK markets have clawed their way out of recession, it has become easier for shareholder activists to point to management failings as the reason behind poor performance. Against a background of rising share prices, the risk of a failed shareholder activist campaign is mitigated. There have also been a number of US activist funds opening offices in the UK to take advantage of market conditions and to apply tactics that have long been used in the US. Social media also makes the propagation, and discussion, of activist agendas much easier.
One of the conclusions that investors have drawn from the financial crisis is that shareholders can no longer be passive passengers in the conduct of the businesses that they are invested in. UK institutional investors who have traditionally exerted power behind the scenes in smoke-filled rooms are now more willing to take public positions against the management of the companies they are invested in. This was evident in the 2012 ‘shareholder spring’ where the report of the remuneration committee at a number of high-profile companies was either rejected by shareholders or suffered significant minority d
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