Australian boardrooms should brace for increased shareholder activism, as public companies around the world are turning to new digital channels in greater numbers to counter dissident campaigns.
While shareholder activism remains in its infancy in Australia, there have been recent developments, including the creation of a number of specialist activist funds including from the US, which herald more activity is looming.
Traditionally, shareholder activism in Australia has tended to arise when a company has lost substantial shareholder value through either corporate misfortune or perceived mismanagement.
However, we are likely to follow the US’s lead, where even the most successful companies are targeted if Board decisions are perceived to have resulted in a loss in shareholder value.
The arrival of US specialist activist funds in Australia has signalled a new approach to mergers and acquisitions strategy, with attempts to overthrow company boards without launching a formal takeover bid. This, in effect, denies shareholders of the opportunity to sell out at a premium when company control changes.
In recent years, public companies have adopted a more active approach to investor relations using multiple digital channels to enhance their investor relations effort, and these strategies are also helping to counter campaigns by activist investors.
The US Securities and Exchange Commission has now allowed the use of the hashtag #USEarnings in company tweets, but added that companies must explicitly identify which social media sites will be used for communications.
The SEC’s decision to allow social media as a disclosure vehicle will no doubt accelerate change in other markets such as Australia, as investors demand these same channels.
Recent studies have shown that analysts, institutions and financial journalists are active users of social media to source stories about companies. Those companies which fail to engage via social media are unable to communicate in these increasingly important media when bad news strikes.
The growing importance of social media to public companies in Australia has also been highlighted by recent ASX guidelines, which now require listed companies to monitor investor blogs, chat sites or other social media that regularly comment about them.
Some of the top social media trends adopted by companies as part of their investor relations tactics include:
- Dedicated issues microsites: During activist campaigns, it is important to establish a digital platform for disseminating shareholder value messaging and quickly respond to activist attacks. This has led a number of companies to develop issue-specific microsites.
- Social media: Companies under attack from dissident shareholders are increasingly turning to Twitter, Facebook, YouTube and corporate blogs to provide their own content. These channels can serve to drive traffic back to the corporate website or specialist microsites to counter activist campaigns. Using them also ensures the company has an established audience of followers, before crisis strikes.
- Dynamic content: Boards and executives are no longer limiting their investor communication to PowerPoint presentations and shareholder letters. They are now utilising the spectrum of multi-media channels, such as infographics, executive blog posts, and videos from the Board Chair to provide dynamic and visually appealing content.
- Online advertising: Activists have started utilising online advertising to reach investors. Companies are also adopting this approach to drive traffic to their microsites and social media communities. This also supports the prioritising of their ‘story’ in search results.
For more information on protecting against, mitigating and managing shareholder activism, please contact Bruce Ruddy, Principal Client Director on 3229 4499 or firstname.lastname@example.org.