The Future of Shareholder Activism
The future is looking pretty bright for shareholder activists in the UK, which is good news because an awful lot of new players appear to be entering this highly specialist investment space. Activists are helped by a number of positive long-term factors, including:
Increased merger and acquisition activity sparked by record levels of cash on corporate balance sheets.
Increased regulation of the financial services sector hasn’t hit hedge funds very hard, giving activists the continued freedom to raise new funds.
Relationships between activist hedge funds and target companies are becoming less confrontational and more diplomatic.
Financial services, utilities and technology spaces probably offer the most scope for activist battles in the future.
Activist hedge funds have the wind at their back because of the very public backlash against excessive CEO and board-level pay, which shows no sign of abating. The public anger is good news for activists, who love to point out the lack of value being added by the managers of targeted companies.
In particular, America’s new financial-reform bill contains a ‘say on pay’ provision, which allows shareholders in all types of companies to weigh in on executive compensation. The SEC is also trying to make it easier for shareholders to nominate people to boards of directors.