Lazard’s Thomas reflects on IR lessons from activism

Feb 28, 2018

Rich Thomas, managing director of the shareholder advisory group at Lazard, talks to IR Magazine’s Andrew Holt about key recent moments in the history of activism, and lessons for the IR profession

Was the shareholder activism at Rolls-Royce in 2016 – when the car maker named a representative of ValueAct Capital Management to its board – a watershed moment?

Rolls-Royce is an iconic UK company, with strategic national importance, and ValueAct is a Tier 1 US activist. But it wasn’t until the AkzoNobel and Nestlé campaigns that we began to really sense change in the mind-set of management teams.

How did the situations differ at AkzoNobel and Nestlé in 2017, and what was the impact?

In the wake of these campaigns, the tone of what we hear from corporates has changed. In Europe, activism now feels more real, and closer to management teams. The impact of activism can be seen in business strategies. Management teams are also facing intense shareholder pressure. Today, many more European companies want to address activism and shareholder engagement.

Have boards been on a slow learning curve in respect to activism?

European boards are now following the same learning curve US boards experienced for the past three to five years, but things are happening faster today, so the learning curve is steeper.

What have been the lessons from US activism?

I think one of the biggest lessons learned is the importance of engaging with and knowing your shareholders. Activists derive their strength not from the 2 percent stake they acquire, but from the support they rally among the other 98 percent. That has raised the bar for companies.

Management teams need to think of IR as a strategic function. There is added pressure to provide more detail and greater clarity about the business strategy, so that shareholders clearly understand what the company is trying to achieve, because if that strategy is not well understood, it provides a clear opening for an activist.

What does this mean for the engagement going forward?

The importance of IR communication and shareholder engagement cannot be overstated. Companies must send a clear message about their strategy and objectives and ensure shareholders understand and support that strategy.


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