Shareholder activism fuels board culture change in Asia

Jan 29, 2020
Contested scenarios in Asia triple since 2014

Issuers in Asia are more likely to seek settlements with activist investors than they were five years ago, due to activists’ increasing success rate in contested meetings across the region, according to data from Activist Insight.

Shareholder activists gained 40 board seats from 32 contested meetings in 2019, compared with 25 seats from 10 meetings in 2014, the study finds. Board battles between issuers and activist shareholders have gradually gone up since then, reaching a high of 32 contested meetings in 2017. 

A high rate of success for activist investors has prompted Asian issuers to address the shareholders’ concerns. Activist investors obtained 27 board seats from 12 settlements in 2019, compared with 15 seats from seven settlement cases in 2018. In 2014, only two settlements were reached between activists and Asia-based companies. 

Board seats gained by activists in Asia

  2013 2014 2015 2016 2017 2018 2019
Number of campaigns 39 49 79 93 97 119 107
Contested vote Meetings - 10 21 28 32 31 32
Seats won - 25 24 57 38 59 40
Settlement Settlements - 2 4 7 4 7 12
Seats won - 5 10 7 8 15 27
 

 

Asia on the radar
Activist activity has increased significantly in Asia during the last six years. In 2013, only 39 campaigns were launched in the region, according to the report, accounting for about 5 percent of global shareholder activism. In 2019, there were 107 campaigns aimed at companies in Asia – representing 13 percent of global shareholder activism – a slight decrease from the all-time high of 119 campaigns in 2018.

Josh Black, editor-in-chief of Activist Insight, explains that the rise in activism across Asia in recent years could, in part, be a response to the level of sophistication of activism-preparedness that has swept across North America. As activists look for markets where they can be effective, they could be drawn to places where there have been fewer incidents of activism.

Asia vs US trend
The rise in gaining board seats from contested scenarios in Asia is bucking a downward trend in the US, where issuers have more experience with activist investing. In the US, contested meetings fell to 16, reaching a six-year low in 2019, compared with 25 board battles at US-based companies in 2014.

The report underscores that North American issuers are more willing to settle than companies based in Asia. In the US, 210 board seats were gained from 117 settlements in 2019, up from 106 resolutions forged in 2014. 

‘In North America, any company can be vulnerable to shareholder activism. [As a result] there is a well-known process, [particularly] in the US, compared with Asia and other regions,’ says Black, adding: ‘In the US, it is very common to reach settlements.
 
‘Settlements are probably more often cheaper than going all the way to a contest. There are some exceptions, such as when a settlement might involve reimbursing the activist for its solicitation costs or legal fees.

‘Some contests settle on the day of the vote, so the saving is probably not great. But early settlements are almost certainly a lot cheaper and a lot less embarrassing or unpredictable. Less experienced markets like Europe, Asia and Australia could reach a higher rate of settlements by engaging with activists and their other shareholders on a regular basis.’

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