Open and effective communication regarding director appointments, executive committee appointments, succession plans, nomination governance and process, board evaluations, will all boosts transparency and good governance recognition which strengthen shareholders’ trust. Whichever communication approach, nominations committees should reassure shareholders of the sustainability of the board and executive management by disclosing relevant information.live streaming film Underworld: Blood Wars 2016
There has been a recent trend of shareholders asserting their power as owners of the company to influence its behaviour via private discussion or public communication with corporate boards. Groups like ISS and Glass Lewis are more effectively managing the interests of shareholders, influencing voting and the filing of shareholder resolutions on a range of issues. This type of active shareholder engagement is absolutely on the increase and boards should think actively about how to engage with shareholders. The number of large US companies who stated in their proxy statements specific active engagement approaches have doubled in the past 5 years. This is also reflected in the number of proxy access proposals, which have grown rapidly.
The trend is of activist investing is prevalent in the biotech industry, because “that’s where the money is”, according to an article featured in The Boston Globe (here). One exponent of activist investing is Alex Denner of Carissa Capital, which holds stakes in various biotech companies, two of which are Aegerion and Ariad. In both companies, he has used a variety of regulatory deployed governance arguments, as well as significant shareholdings, to unseat the CEOs. Ariad’s Harvey Berger has been deposed and Mark Beer, who as CEO of Aegerion invited some unwelcome criticism, is also replaced. As a major shareholder, Denner has proposed new board directors and it was also announced that Denner will assume Chairmanship of Ariad, perhaps to negate any challenge offered by Berger who remains a shareholder of the company. Denner says he wants to introduce a greater level of ‘accountability’ to the company and maximise the shareholder’s opportunity for a return. Elsewhere, activist Bill Ackman’s Pershing Square Capital drove hard at Allergan in an attempt to push the company to acquiesce to the pursuant Valeant Pharmaceuticals, the result of which was the acquisition of Allergan by Actavis.
One of the greatest defences against activist investors is to run your company well and deliver good performance. Activist investors like to ride in on a ticket of sub-optimal performance by the management or poor governance by the board. Not all activist investors are seen as being negative influences, they are very good at pushing boards and management teams to answer critical questions, particularly where they see weak boards, power overly devolved to management and complacency taking hold over top and bottom line management. The introduction of effective approaches by nomination committees who can spot the gaps and weaknesses of boards and management can ward of activist investors. Getting to grip with areas such as; board composition and leadership, executive succession and management performance, then communicating these measures to investors will reduce the threat of activist shareholders.