7th May 2020
Shareholder Activism: Communicative recommendations for CFOs and IR Managers
ABB, Nestlé, Thyssenkrupp: Activists are increasingly targeting European companies. Some demand drastic measures from their targets’ executives and supervisory boards. They typically depend on allies to push their demands for strategic change. Activists can often achieve the required majorities by informally teaming up with institutional investors, making them important potential partners. These investors objectively evaluate the arguments of the activists, because both – at least in essence – have one goal in common: shareholder value. Against this background, the requirements for CFOs and IR departments regarding communications with institutional investors are also changing to become (even) more demanding.
At a time where many companies are struggling for sheer economic survival and where the market is extremely volatile due to the global spread of coronavirus, major activists have declared a kind of “truce”. However, this state of affairs will not last. Instead, activists could use the low valuations to build up or extend their positions. Management boards, investor relations and communication departments are therefore well advised to deal with this topic right now.
Hering Schuppener’s many years of practical experience in dealing with activists form the basis for the 10 “golden rules” compiled in our whitepaper. In addition, discussions were held with representatives from national and international institutional investors. One of our interview partners, who serves as Vice President of Asset Stewardship at a large institutional investor, emphasized that “engagement is always the key to success.” This statement summarizes quite well the essence of our communicative recommendations.
- Keep yourself informed about changes in your shareholder structure
- Engage with stewardship teams of investors and proxy advisers
- Tackle deficits in corporate governance already at an early stage
- Avoid information vacuums
- Embrace your relationship with institutional investors
- Prepare for a long fight once an activist is on board