Shareholder activist demands for board representation up 9pc but success rate plunges

The success rate for shareholder activists in Australia was halved in 2023, despite sharemarket volatility and a weaker economy, a new report claims.

Australian shareholder activists launched a spate of campaigns last year but their success rate halved, despite sharemarket volatility and a weaker economy, a new report claims.

The Diligent Market Intelligence: Shareholder Activism Annual Review 2024 report found the introduction of the universal proxy card was driving both traditional and non-traditional activists to launch campaigns aimed at remuneration and ESG oversight.

DMI editor in chief Josh Black said market conditions played a notable role in shaping activist demands and the companies they chose to target.

“Now more than ever, boards need to demonstrate that they are financially resilient and have strong governance practices in place to stay one step ahead,” he said.

Last year out of 74 activist campaigns concluded in Australia only 16 per cent were successful, which is half the proportion in 2022 (31 per cent). A further 13 per cent of campaign objectives were classified as partially achieved.

The report found there were 36 shareholder activist demands for board representation – a 9 per cent increase from 2022. However, of these, 89 per cent were resolved by a vote, and only 11 per cent resolved via settlement – down 60 per cent on 2022 levels.

Overall 23 board seats were gained by shareholder activists in Australia, down from 33 gained last year.

Among the major activist stoushes last year were Keybridge Capital’s Nick Bolton and Sandon Capital locking horns with Magellan Financial Group. Activists were also active in shareholders’ rejection of the Qantas executive pay plan but failed in their bit to oust ad guru Todd Sampson from the board.

Green activists involved themselves in Brookfield’s takeover bid for Origin Energy.

Ethical investment group Ethinvest rallied votes against Santos’s oil and gas expansion plans and the re-election of Woodside Energy’s longstanding director Ian Mcfarlane to the board. They failed, however; not a single ESG-related activist demand was successful in Australia in 2023 with 29 out of 29 demands failing, up from a failure rate of 65 per cent in 2022.

According to the DMI report, activism levels remained high in many markets around the world, with shareholders looking further afield for value-creation opportunities driven by valuation gaps, governance reform and mergers and acquisitions.

In 2023, 982 companies were subject to activist campaigns globally, ranging from green funds calling for Scope 3 emissions reporting to multibillion-dollar hedge fund managers demanding boards seats.

That marked a 4 per cent rise in companies targeted, compared to 938 in 2022 and 879 in 2021. It was the highest level since 2019. Last year the number of companies subject to campaigns rose by 25.5 per cent in Canada, 13.4 per cent in Asia, and 7.8 per cent in the US.

“Activism levels have remained high in many markets, reaching pre-pandemic levels, and we expect to see such levels again during the upcoming proxy season,” Georgeson global CEO Cas Sydorowitz told DMI.

Originally published as Shareholder activist demands for board representation up 9pc but success rate plunges