Skip to main content

Activists are rebranding as a ‘force for good’

This article was originally published on

The image of the activist shareholder has changed, especially in Asia.

Accused of being short-term, secretive corporate raiders in the past, activists are now careful to position themselves as ‘change agents’, helping companies unlock value and drive growth.

Today, shareholder activists are very willing to play the long game, as can be seen by Elliot Management’s multi-year campaign against Samsung in South Korea, and have been claiming high-profile successes, such as Hong Kong-based Oasis Management pushing Japan’s Nintendo to move into mobile gaming.

Activists in Asia are also becoming more sophisticated communicators, using traditional and digital media to create campaigns, rally investors and brief journalists directly. When speaking publicly, activists go to great lengths to point out that they have only taken a more vocal route after all other avenues for reasonable and rational engagement have been exhausted.

This shift in positioning, with a view of being a ‘force for good’, has been helped by policy changes in some of Asia’s key markets. Most notable has been Japan where Prime Minister Shinzo Abe is driving corporate governance reforms and strengthening the protection of minority shareholders. As the Harvard Business Review recently stated: “Reform is the carrot; activist investors are the stick”.[1]

Likewise, South Korea’s Financial Services Commission has announced plans that aim to encourage minority shareholder participation. Other markets including Hong Kong, Singapore and China are following suit and opportunities for shareholder activists are expected to multiply across Asia. According to J.P. Morgan, 106 shareholder activist campaigns were carried out in Asia during 2017, up from only 10 in 2011.[2]

Business and Politics

In this new environment, many management teams in Asia are now more willing to engage with activist shareholders, rather than ignore them in the hope that they will go away.

This has been prompted by a change in attitude from investment firms and financial institutions, including large US and non-US institutional investors, national pension funds and sovereign wealth funds, which have become more active in how they manage their holdings.

And while it does not mean that companies will comply with the activists’ demands, it does mean that companies are having to be much clearer about explaining their strategies to all stakeholders. This can include providing clarity on governance issues and explaining the rationale for complex cross-shareholdings, selling off assets or divisions, clarifying the role of government officials and financing sources, and breaking up family control or relationships that run contrary to global best practices.

Faced with this type of shareholder pressure, dealing with questions from their weighty and previously quiet investors, and trying to handle well-planned and smoothly executed activist campaigns, companies are often on the back foot.

So how can management teams prepare for this type of shareholder activist engagement, when reputations can be won and lost in a heartbeat?

Asian companies need to consider that an activist investor attack is very much like a political campaign. While activists may target investors and equity market participants who influence investors, rather than the voting public, the campaign dynamics are not very different — campaigns are lengthy, positive and negative messages fly back and forth and are constantly being revised and honed, key constituencies can be volatile, and surprises lurk at every turn.

It is very important not to be caught off guard and focus on the following areas:

  1. Prepare for any issues early. Building goodwill and support, before an attack even happens, is key. A company engaged by an activist will come under intense media scrutiny, and without well-established media relationships, it is vulnerable, leaving the activist in a leading position to set the agenda.

  2. Know your audience. Activist investors have the benefit of needing to address only equity investors and influencers of equity investors, such as buy-side analysts, the financial press and the proxy advisory services. Companies, on the other hand, face a more complex communications challenge and have to deal with a far broader range of stakeholders, including employees and partners. As a company, if you do not understand these audiences or know what they are really thinking, then your messaging may miss the mark, sometimes very widely.

  3. Clearly communicate your own long-term vision. An activist investor’s biggest weapon is being a ‘champion of change’ and many dissatisfied investors will often choose ‘change’ for ‘change’ sake. Companies must seize the initiative by defining their strategic and financial goals and providing a clear path to realising them. The points made by the activists also need to be addressed and clearly countered if they are wrong, or considered if they have merit. Positive messaging with clear milestones and deliverables should be at the centre of any strategic communications campaign.

  4. Run a strong defence and don’t be afraid to go on the offensive. Activist investor campaigns are often long and full of unexpected surprises. Effective communication will require tenacity, flexibility and constant monitoring of all media and stakeholder groups. You will need to keep up with shareholder and commentator sentiment, to refine messages and tactics as necessary and to spot issues before they turn into unpleasant surprises. Today’s world of fast moving news and social media requires 24/7 monitoring to allow the communications team to spot emerging campaign issues early enough to counter them before they turn into large problems.

    Get these four areas right and Asian companies will stand a much better chance of making sure their investors understand, and buy into, their vision for the company. Ignore them, and activist shareholders will be only too happy to point the management in the right direction.

    This article first appeared in the IR Magazine.