Shareholders are integral to a company. Most times, companies and their shareholders share a healthy relationship built of trust in performance and collaboration. However, shareholder activism has seen a recent rise in Australia. The term describes when investors use their rights to change a business' management team, influence its strategy, or shift its stance on social issues. The US has traditionally been fertile ground, with 65 per cent of global shareholder activism focused there, according to Arnold Bloch Leibler research.
Recently, however, Elliot Management's data shows that activism campaigns for Australian companies increased from 29 in 2011 to 57 during the first nine months of 2017.
This makes Australian corporates vulnerable to aggressive action from large institutional investors and begs the question — how can your business protect itself from such an occurence? The answer may lie in inviting trusted investors to take a more active role and maximising the relationship.
The Shareholder-Company Relationship
Typically, the shareholder/company relationship is a one-way street, with companies focused on delivering incremental value and dividends at all costs. Recently companies have begun using shareholders as a resource, a strategy which protects against activism by inviting their feedback and acting on these criticisms.
The most famous example of this strategy is the story of Nikon's recent resurgence. Facing stagnating revenues and plummeting stock prices, the company looked to high-level institutional investors for feedback. Instead of focusing on what they could do for investors, Nikon looked at what shareholders could do for the company. By conducting countless interviews with industry savvy investors, they used their findings to restructure the company and deliver annual savings of AUD 256.7 million. They then used another round of feedback to further cut costs and quickly saw their stock price rise by 35 per cent.
The Two-Way Street
Shareholder activism is a fascinating trend in Australia, one that can affect any publicly listed company that isn't cautious. A more open two-way dialogue with investors is an excellent way of staying clear of these controversies, while also fine-tuning your company and improving your relationship with shareholders.
If you want to get the most out of your shareholders or need expert advice in completing a merger or IPO, get in touch with the experienced team at Alpin Advisory today.