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Stay Woke: Making Sense of Shareholder Activism

The irrepressible former French statesman and relic of all things revolutionary, Napoleon Bonaparte, once uttered, “power is my mistress. I have worked too hard at her conquest to allow anyone to take her away from me”. His brazen meditation on the addictive and possessive relationship that those in power have with power itself has some resonance two hundred years later.  

Today, our traditional definition of “power” has gone through somewhat of an extreme makeover: free market capitalism edition.

The political power that Napoleon once lusted over like a Gupta to a parastatal has now taken a new, financialised, form. The most powerful institutions in the world today – are corporations. Robert Monks tastefully remarks that, corporations, far more than any other institutions, determine the air we breath, the quality of water we drink, and even where we live. That’s quite hectic, Mr. Monks.

But just as the allies, through a tactful coalition, went on to defeat Napoleon at the battle of waterloo in 1815, a new coalition is looking to change the corporate power-complex in 2018.

Cue, shareholder activism – a phenomenon that is restructuring the relationship that shareholders have with profit-spinning corporations.

An activist shareholder is a shareholder that uses an equity stake in a corporation as leverage to put pressure on management to take certain policy decisions. Shareholders, however, don’t simply waltz around the bonfire of activism and sing Kumbaya for no apparent reason. They have motivations – we all do.

Effective shareholder activism chiefly aims at triggering substantive corporate change.

With corporations plundering the environment through unethical business practices and top management enjoying salaries higher than the Burj Khalifa, nimble shareholder activists are becoming an increasingly poignant part of the conversation on corporate governance.

Activists are researching every detail of the companies they invest in. From foraging financial results to analysing internal labour practices – even taking an interest in the vehicles used for deliveries. More than just shareholding Kumbaya singers, activists are placing a hypersensitive focus on the factors that may affect shareholder value creation – looking for weaknesses to ventilate at the next annual general meeting. They are staying woke.

With KPMG South Africa reeling after being fired by some of their top clients for being found complicit in the country’s state-capture saga, shareholder activists are using their collective muscle to drive an ethical, ESG-centred mode of corporate governance.

Shareholder activists have outgrown the negative caricatures of being corporate raiders, looking to squeeze a short-termist buck or two. Today, shareholder activists are at the forefront of democratising corporate decision-making. Making the circle bigger. Creating tension, necessarily so.

Top execs in some of the world’s largest corporations are vexed at the idea of this rampant shareholder activism. However, a quick skim of Dale Carnegie’s book How to Win Friends and Influence People would remind them: “Don’t be afraid of enemies who attack you. Be afraid of the friends who flatter you”.