September 22, 2010
As demonstrated by the recent high-profile battle over the share restructuring at Magna International, it's not just M&A transactions in which shareholder activism has asserted itself. Organizations such as RiskMetrics, which provides risk management and governance services, and the Canadian Coalition for Good Governance, a group of 41 institutional shareholders, are growing in size and becoming more vocal in their opposition to board of directors' decisions. Indeed, the dynamic of activism is allowing minority shareholders of all stripes to set agendas for many corporations.
Activist shareholders are increasingly skeptical of directors' will and ability to protect their interests. So it is more important than ever for companies to be proactive in explaining the reasons for and benefits of a transaction or position.
Sensitivity to significant shareholders' interests and views is crucial. Early and open communication may save boards from being blind-sided by investor dissent later.
"The best ongoing strategy for boards is to have a consistent and well-known story for significant investors about the company's plans for medium and long-term growth," says Kevin Morris.