March 7 — Corporate directors have mixed feelings about the recent surge in shareholder activism, a March 3 survey by NYSE Governance Services and Spencer Stuart found.
The “What Directors Think” survey, which polled nearly 400 board members, found that 62 percent of directors believe that activism has reinforced and rewarded “short-termism.”
At the same time, half of the respondents said activism has created more awareness of good governance practices.
Public company directors are “keenly aware” of their duty to respond to the concerns of all shareholders in the current environment, NYSE Governance Services President Adam Sodowick told Bloomberg BNA in a March 7 e-mail. “But not all shareholders are equal, and the results of many high-profile proxy contests in the last couple of years have shown that it’s difficult to win the battle for long-term strategic growth when an activist is leading the charge for short-term gain.”
Sodowick also noted that while there may be an “immediate upside” to an activist's agenda, many board members worry that such gains may erode investment in research and development, human capital and corporate sustainability.
He said that to better address this dynamic, NYSE Governance Services's Future of Responsibility, Governance and Ethics program will be bringing together directors and activist shareholders later this year to foster better communications.
Last year was an active one for shareholder activists, of which Elliott Management, Paul Singer's $27 billion hedge fund, was seen as one of the most influential . According to Activist Investing Annual Review 2016, Elliott pushed for changes at 18 companies in 2015, including pressuring EMC to be acquired by Dell .
Meanwhile, the NYSE and Spencer Stuart poll reported that while most directors view ongoing shareholder engagement as positive, almost a third (31 percent) expressed concerns over whether direct engagement carries the risk of board liability. The respondents also said direct engagement may:
Sodowick warned that the rules of engagement require a strict adherence to Securities and Exchange Commission regulatory guidelines. Accordingly, boards must be careful to respond to shareholder requests “within the scope of good governance practices,” he said. “Many boards are responding to their concerns by taking part in additional board education and training, which allows them to prudently prepare for and carry out shareholder communication ahead of a potential crisis.”
In other findings, the respondents said the most significant challenges facing public companies this year are:
Directors continue to express significant concerns about cybersecurity, the survey said. Over a third (38 percent) said that while they are doing everything they can to protect their company, “cyber risk is really out of their hands.”
To contact the reporter on this story: Michael Greene in Washington at email@example.com
To contact the editor responsible for this story: Yin Wilczek at firstname.lastname@example.org
The survey results are available at https://www.nyse.com/publicdocs/What_Directors_Think_2016.pdf.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)