DealLawyers.com Blog

December 1, 2016

Shareholder Activism: The Rise of Institutional Engagement

This NY Times’ “Deal Professor” column notes the rise of shareholder engagement strategies & the consultants who advise on them. As institutions become more assertive about governance, companies are turning to consultants – including a new firm co-founded by Chris Cernich, formerly ISS’ M&A Chief – to help them engage effectively with institutional investors:

This is where Mr. Cernich’s firm will come in, competing with CamberView and others trying to mediate the new dialogue between a company and its shareholders.

This is the future. Big institutional shareholders are working to define their relationships with public companies, and those companies are being forced to engage directly without intermediaries like I.S.S. In the midst of this, shareholders are still figuring out what they really want and whether they can change companies for good.

Have corporate engagement efforts been an effective response to activism?  This excerpt from Sullivan & Cromwell’s comprehensive memo reviewing 2016 activist campaigns suggests that the answer is “yes”:

The time and effort that companies and institutional investors have spent developing a mutual understanding of each other’s concerns have narrowed the opportunities for activists at high-profile companies, and the returns of activist funds overall are down in 2016.

Sophisticated engagement strategies seem to be mostly the province of large cap companies. The total number of activist campaigns remains high, due in large part to activism targeting small and mid-size companies.

John Jenkins