The week in investor relations: Activism, AGMs and dividends all up for debate
– Shareholder activism fell sharply in March as the spread of Covid-19 accelerated, reported Reuters. The number of campaigns launched in March stood at 16, a fall of 38 percent compared with February, according to data from investment bank Lazard. ‘Lower M&A activity and companies focused on conserving cash will mean activists are likely to increase their focus on operational performance and how management teams react to the crisis as the basis for new campaigns,’ said Jim Rossman, head of shareholder advisory at Lazard.
– While many companies have cut dividends during the Covid-19 outbreak, ‘family-influenced’ firms in Europe have proved less likely to do so, according to Bloomberg. Companies with business dynasties as major investors are more likely to be risk-averse and favor regular payouts, explained the article, citing research from AlphaValue. Such companies have bucked the trend in the Stoxx Europe 600 Index, where more than a quarter of constituents have postponed or cancelled dividend payments during the last month.
– Major investors are warning about the potential for senior management to see huge pay days due to the market volatility brought about by Covid-19, reported the Financial Times (paywall). With markets currently depressed, managers could receive many more shares than normal as part of their long-term incentive plans. Future market rallies could then dramatically increase the total payout. ‘Five big asset managers have called on boards to ensure executive pay reflects the experience of stakeholders,’ wrote the FT.
– The FT also noted that investors are concerned with the way virtual AGMs could ‘shift the balance of power’ away from shareholders. Given the Covid-19 restrictions on movement and travel, companies are holding more AGMs completely online. In a number of countries, regulators have changed the rules to allow virtual-only meetings. ‘If it is a physical AGM, it is very hard not to give the microphone to someone who seems insistent on asking the tough questions. In a virtual AGM, it is much easier to manage that,’ said Sébastien Thevoux-Chabuel, a fund manager at Comgest.
– Financial firms are debating the use of circuit breakers in the US stock market after the protective measures were triggered a number of times in March, reported the Wall Street Journal. The firms, which have not come to a consensus about how to proceed, include Morgan Stanley, BlackRock and Citadel Securities, reported the newspaper. Some of the concerns being voiced focus on whether it is necessary for circuit breakers to kick in shortly after the market opens, as they did on three of the four occasions when they were triggered in March.