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Jul 22, 2020

Institutions take growing role in activism

Around half of shareholder activism in H1 2020 focused on governance issues, notes CGLytics

Institutional investors are increasingly taking the lead on shareholder activism, causing a surge in campaigns focused on corporate governance, according to new research. 

CGLytics, the governance data provider, looked back at activist activity globally over the last three and a half years. It finds the number of campaigns focused on governance grew by 45 percent between 2017 and 2018 and by 26 percent between 2018 and 2019. 

The first half of 2020 saw 797 activist campaigns with around half (49 percent) driven by corporate governance concerns, notes CGLytics. Over the same period, the number of institutional investors involved in campaigns stood at 274, with some investment firms taking action against more than a dozen companies.

‘Institutional investors like CalPERS, BlackRock, Vanguard, State Street Global Advisors and others have been pressing companies to reform their corporate governance practices to improve financial or shareholder returns over time,’ says Aniel Mahabier, CEO of CGLytics.

‘We have seen an increase over the years in these investors actively engaging with their portfolio companies on these topics and using their voting power when companies don’t conform.’

Governance areas attracting attention include shareholder rights and board issues such as tenure, independence, diversity and expertise, according to the CGLytics research. 

Covid-19, along with the Black Lives Matter protests, have put further focus on whether companies have the right mix of skills, experience and diversity, adds Mahabier. ‘The underlying assumption is that having more diverse boards will help companies to better navigate… the challenging environment Covid-19 has created,’ he explains.

While the number of campaigns overall is growing, activists have been less successful in 2020 than in previous years, notes the CGLytics report: during the first six months of 2020, only 9 percent of campaigns were successful or settled, compared with 17 percent for the whole of last year.