Shareholder Activist

Who Are Activist Shareholders and What Do They Do?

by Abby Portugal on and last update on February 13, 2020

Activist shareholders are among the most influential figureheads within the field of corporate investment. However their impact is often undervalued, especially in circles where people are oblivious to the importance of their role across multiple facets of business.

More often than not, people have misguided perceptions of the activist shareholder, and fail to understand what they really do. Typically, images of political and social activism arise, but this is a somewhat limited perspective.

Though drawing attention to social or ethical causes is certainly one aspect of it, this is a small percentage of the role. On a mainstream level, activist shareholders are at the heart of corporate governance.

They ensure firms maximize profit in alignment with what works best for wider shareholding communities. They are a stern, critical voice who expose elements of concern among various stakeholders, with a view to accomplish progressive outcomes across the board.

 

But how exactly does this work? Let’s take a deeper dive into the concept:

 

A Powerful Voice

Activist shareholders rarely hold a large stake in the firms they influence. They instead leverage publicity to encourage organizations to work in the best interests of investors, an overarching goal for most businesses.

However many company representatives are guilty of rejecting change, a resistance which can often limit the progression in a modern world. This can limit productivity and organizational growth.

 

Activist shareholders can overcome adversities with the following approaches:

Demands

By actively seeking remedies in areas where companies are underperforming, activists can derive solutions to improve inherent company flaws. For example, if a company executive is struggling to make the grade, an activist shareholder can lobby for public support to have them replaced. They might even press for one of their associates to get a seat on the corporate board for even greater influence. In this case, the main objective would be to bring media attention to an issue via a press release or public announcement.

Campaigns

Concerted efforts for change are far more detailed than they may appear to be, especially when there are many causes for concern within the company. Activists often conceptualize and execute complex campaigns targeted at certain aspects company’s strategy, leadership, and structure.  These campaigns typically meet a diverse range of demands, which are again consolidated by media support and a vast array of resources to achieve a specific objective.

Proxy Contests

Activists commonly rally support for demands by utilizing the proxy-voting power of co-shareholders. This boosts the chance of successful endorsement on key issues in corporate ballots. They can accrue a number of shareholding entities which are sympathetic to their views, and thus more likely to reinforce assertions to achieve overarching goals.

 

Activists Shareholders – Big Brands

Activists are rarely individual shareholders. In fact, to attain maximum influence it’s important to establish a corporate presence. This can be achieved by investing in other corporates, many of which have dedicated investment funds.

This helps activist shareholders achieve maximum influence over proceedings. Global reviews of shareholder activism suggest more companies are being targeted than ever before, in countries like the US, Japan, Canada, Australia and more.

Social media has opened multiple avenues to garner public support on emotive issues. Leveraging the influence of social media is a fantastic way to align the view of the public with targeted objectives, where a collective viewpoint holds more power than an individual one.

 

Let’s take a look at this in greater detail:

 

Leveraging the Power of Social Media

The modern activist shareholder can take advantage of social media channels to generate interest in their campaigns. By capitalizing on the exposure of social media, activists can gain a significant advantage in election contests.

Using social media, activists can solicit votes and communicate with shareholders. Using elements like tweets, Facebook updates, and Instagram posts, they can provide news on recent campaigns. By embedding links in posts, they can drive targeted followers to the campaigns they’re interested in. .

When traffic starts coming in, activists can look at the analytics surrounding audience visits to improve future communication efforts. By using statistics, activists can tailor campaigns to suit the individual preferences of users.

By embracing professionalism as a core concept, activists can nurture potential leads and win over fans for a particular cause. Successful activists can encourage change in companies that need it, where activist tactics are becoming increasingly popular as a means of influence.

 

Corporate Relations

Corporates commonly make mistakes which can harm relations with activists. Executives can mount defensive strategies when they hear an activist has bought a substantial stake in their company, something which can put an immediate strain on the relationship.

Executives should avoid creating a warlike atmosphere, instead embracing activist shareholders by establishing a dialogue via effective communication channels. By engaging activists and bringing truth and transparency to the fold, any potentially harmful interactions between activists and shareholders will fade into insignificance.

 

After all, it’s important for corporates to maintain healthy bonds with activist shareholders, especially when you consider their influence as critical stakeholders.

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