Issuers will remain under pressure to deliver for shareholders, so boards need to be prepared for shareholder activism.

Shareholder activism continued to be a big challenge for issuers in 2022. While disagreements over strategy and performance have often ended with proxy fights, we saw ESG-related activism arrive with a bang, most notably at AGL Energy Limited with the derailing of its planned demerger and the election of non-board endorsed directors at its AGM. The ESG flavour continued with shareholder proposals at fossil fuel producers and the banks that finance them. The proponents of shareholder proposals moved away from filing resolutions related to supply chains, modern slavery and First Nations engagement, as they have in previous years.

Shareholder activism usually begins with engagement with board and management and then can go public with a shareholder letter or the activist leading a vote no campaign at the AGM or shareholder meeting. Australia’s two strikes legislation gives an activist one outlet to target the board and seek director changes, albeit slowly. Activists triggering the ‘nuclear’ option by calling a shareholder meeting within two months has been observed up and down the ASX by market capitalisation with meetings held at TNG, Ten Sixty Four, Pacific Smiles and Namoi Cotton, amongst others. In nearly all instances, issuers and activists have utilised shareholder engagement services to analyse the register and solicit votes.

As the Australian economy slows due to high inflation, interest rates and reduced demand, issuers will remain under pressure to deliver for shareholders, so boards need to be prepared for shareholder activism.

Shareholder proposals were mainly focused on climate change and its impacts. Fossil fuel producers, electricity generators and banks were the main targets during 2022. Support for climate-related shareholder proposals peaked at 21% which is lower than previous years. This means issuers are getting better both at managing climate risk and disclosing how they are doing it. Investors have been more likely to support issuers which highlight the progress being made — in practice but also in company disclosures.

The recent AGM season also showed activists returning in numbers following the pandemic. With issuers now holding physical and hybrid meetings again, disruption and protests have been observed which presents a challenge for issuers to ensure genuine concerns are heard while successfully completing the shareholder meeting. Some issuers have resorted to using metal detectors and bag searches for peace of mind. Public activism won’t be going anywhere as movements and groups are emboldened by the success of third-party candidates in the political sphere.

Georgeson’s Insights

Issuers shouldn’t wait for shareholder activists to arrive and can prepare by:

  • Keeping an eye on their register.
  • Knowing who holds the voting rights at shareholder meetings.
  • Engaging with shareholders — they shouldn’t be hearing from you for the first time when you need their vote.
  • Disclosing how they are managing climate risks and opportunities.
  • Wargaming various activist scenarios including director changes, remuneration report dissent and shareholder proposals.