The Shareholder Rights and Activism Review: Editor's Preface
In the years since the last financial crisis, shareholder activism has been on the rise around the world. Institutional shareholders are taking a broad range of actions to leverage their ownership position to influence public company behaviour. Activist investors often advocate for changes to the company, such as its corporate governance practices, financial decisions and strategic direction. Shareholder activism comes in many forms, from privately engaging in a dialogue with a company on certain issues, to waging a contest to replace members of a company's board of directors, to publicly agitating for a company to undergo a fundamental transaction.
Although the types of activists and forms of activism may vary, there is no question that shareholder activism is a prominent, and likely permanent, feature of the corporate landscape. Boards of directors, management and the markets are now more attuned to and prepared for shareholder activism, and engaging with investors is a priority for boards and management as a hallmark of basic good governance.
Shareholder activism is a global phenomenon that is effecting change to the corporate landscape and grabbing headlines not only in North America but also in Europe, Australia and Asia. Although shareholder activism is still most prevalent in North America, and particularly in the United States, activism campaigns directed at non-US companies continue to make up a large share of global activism. This movement is being driven by, among other things, a search by hedge funds for new investment opportunities and a cultural shift towards increased shareholder engagement in Europe, Australia and Asia.
The outbreak of the covid-19 pandemic in early 2020 caused an unprecedented economic crisis that has further heightened focus on corporate governance. The crisis has significantly tested companies' oversight, coordination and leadership capabilities to manage a fluid and complex situation impacting companies' business, operations, prospects, employees, stockholders, other stakeholders and government relationships – and activists have been paying attention. Although the covid-19 pandemic has decreased activist campaign activity in the short-term, practitioners generally expect to see activism activity return with full force in the next year. Furthermore, activists are likely to incorporate critique over a company's pandemic response into their campaign thesis.
As both shareholder activists and the companies they target have become more geographically diverse, it is increasingly important for legal and corporate practitioners to understand the legal framework and emerging trends of shareholder activism in the various international jurisdictions facing activism. The Shareholder Rights and Activism Review is designed as a primer on these aspects of shareholder activism in such jurisdictions.
My sincere thanks to all of the authors who contributed their expertise, time and labour to this fifth edition of The Shareholder Rights and Activism Review. As shareholder activism continues to diversify and increase its global footprint, this review will continue to serve as an invaluable resource for legal and corporate practitioners worldwide.
Francis J Aquila
Sullivan & Cromwell LLP