Elliott Advisors knows how to start a ruckus. This proxy season, the activist hedge fund attempted to instigate boardroom coups at both Actelion, the Swiss biotech giant, and National Express, a leading British bus and rail operator.
Shareholders jeered Elliott at Actelion’s annual meeting in Allschwil, Switzerland, and defeated its proposals – but that did little to allay the growing sense that a more aggressive strain of shareholder activism has taken hold in Europe.
‘We were quite fortunate that Actelion was front-running us by a few weeks, and it appeared to be using the same playbook,’ says Stuart Morgan, head of IR for National Express. Although Elliott didn’t succeed in foisting its three nominees onto the National Express board, the company did agree to include one of Elliott’s candidates – Chris Muntwyler – as an independent non-executive director.
‘From a position of strength, we secured a mature outcome,’ adds Morgan. ‘We said, We’ve got investor support, but we don’t entirely disagree with what you’ve said. Activists can sometimes do a good job because they keep management on its toes.’
Tom Powdrill, head of communications at PIRC, a UK proxy research firm and corporate governance adviser, praised National Express ‘for giving a little ground’ in its contretemps with Elliott. ‘National Express got one nominee, with good qualifications, on the board, but it could have been facing three nominees,’ he says.
Elliott-style shake-ups were initiated more often in Europe in the last 12 months than ever before, observes Powdrill. As other examples, he cites Laxey Partners’ failed attempt to force changes at Alliance Trust and the successful bid by activist Edward Bramson, founder of US-based Sherborne Investors, to oust the CEO of F&C Asset Management and install himself and two other hand-picked candidates on the board.
A different style of activism?
Historically, there have been obstacles to waging a successful activist campaign in much of Europe. Many markets are opaque, the proxy voting system has been leaky with votes often lost, and some countries still block any shares to be voted for several days prior to the AGM, putting a damper on shareholder participation. What’s more, in some countries, controlling shareholders enjoy additional voting rights, making it harder for other investors’ positions to gain support.
Sarah Wilson, CEO and founder of Manifest, a UK-based proxy voting service, notes Bramson’s aggressive campaign against F&C was ‘very unusual’ but that similar crusades might become more commonplace in the not-too-distant future. ‘It may be that some activists have gained a taste for this [type of campaign],’ she says.
Over the past five years, US investors have become more prominent on share registers internationally, observes Wilson. ‘While [US investors] originally flexed their muscles domestically, they’re now realising they have significant impact in non-domestic markets, too,’ she points out.
Swashbuckling American tactics represent a stark contrast to the European tradition of effecting change by engaging in a civilized dialogue behind closed doors, however. Simon Wong, partner at London-based Governance for Owners, notes that in Europe approaches to activism vary by country. Shareholder activism has been more successful in the UK, the Netherlands and the Nordic countries, he observes, and less prevalent in Italy, Greece and Spain.
That said, most activists don’t target a particular country, according to Chris Collett, head of advisory services for EMEA and IR market development at Thomson Reuters. ‘They tend to look at particular companies where there’s an opportunity for them to become involved and effect change,’ he explains.
Carrefour, a major French supermarket chain, ‘is a good illustration’ of heightened levels of shareholder activism in France, according to Carine Girard, an associate professor in the finance department of the Audencia Nantes School of Management. She attributes the rise of shareholder activism to changes in French legislation and the growing influence of professionals, such as hedge funds and Proxinvest, RiskMetrics/Deminor, and other proxy-voting advisers.Read the rest of the story >>
[Article by Elizabeth Judd, IR magazine]
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