ESG and Activism The Year of Convergence
Two Types of Shareholder Activism
There are two types of shareholder activism.
There are the traditional shareholder activists, a mainstream part of the financial community, targeting under-performing companies and seeking to change company practices and Board composition in order to improve financial return.
Then there is the new generation of shareholder activists, sometimes coming from the broader environmental movement, seeking to galvanize shareholding to influence companies and boards towards environmental, social, governance (ESG) disclosure and in pursuit of sustainability goals.?
These two may have different visions of activism, changing business from the inside or from the outside and each would express some degree of skepticism towards the other.?
One wants to come to the AGM with a proxy card, the other with a placard.?
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However, the irony of today is that they are increasingly coming to a common view that ESG matters and are beginning to mount collaborative campaigns for business change.
Businesses take note.
U.S. Attitudes
This change is perhaps most notable in the United States, where the first of these types of activists has traditionally been more prevalent. Companies and activists are part of an established landscape, led by corporate lawyers on both sides. Activism is accepted as a market process to address vulnerable companies and boards or sub-optimal company returns in comparison to competitors. A big focus is on mergers and acquisitions.
I had the privilege of being involved in a project based in the United States, the Coalition for Inclusive Capitalism, in which businesses and investors tackle issues about social equity.
What struck me in those conversations, was a deep caution, even antipathy from at least some in U.S. business towards shareholder activism itself. The prevailing attitude seemed to be one of averting investor attention and preparing to resist and defeat activist shareholder proposals.??