Boards concerned about rise of activism, study finds

Apr 26, 2017
<p>New research shows more boards are bracing for activists and speaking to shareholders more than annually</p>

Reports that shareholder activist incidents are on the rise could be influencing boardrooms across the US, according to new research.

The number of boards that have discussed how to prepare for a shareholder activist increased from 55 percent in 2014 to 74 percent last year, according to research from Deloitte and the Society for Corporate Governance.

But the percentage of respondents targeted by activists actually decreased during the last two years, from 31 percent in 2014 to 27 percent in 2016. This is somewhat at odds with other research on shareholder activism, with recent reports from FTI Consulting and Activist Insight suggesting the number of incidents in the US has climbed from 135 in 2010 to 645 last year.

More than half (55 percent) of the respondents to the Deloitte and Society for Corporate Governance study say their boards are being updated on shareholder sentiment and concerns more than once a year.

The majority of respondents (61 percent) say the number of requests from shareholders to speak directly with board members has stayed the same over the last two years, though more than a quarter (28 percent) of large caps saw a slight increase in their numbers.

Three fifths (60 percent) report that at least one board member had been in contact with shareholders or a shareholder group in the last year. This is most likely to be the chairman, followed by the lead director and the compensation committee chair.

But two thirds of respondents don’t have a shareholder engagement policy beyond any stock exchange or regulatory filing requirements. Large-cap respondents are the most likely to have a policy, but only one in three (36 percent) say they do and that it applies to both management and the board.  

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