Activists find their voice
Our cover story suggests shareholder activism is still but a flicker in corporate SA — at least compared to the wildfire that has engulfed listed corporations in the US. Yet, as we were putting this edition of Investors Monthly to bed, two high-profile incidents put paid to notions that shareholder activism will always be limited to the periphery of the JSE … or be mainly the realm of determined individuals or smaller investment entities.
If institutional activism revolves mainly around behind-closed-doors interactions with company executives, then developments at private education group AdvTech and industrial services counter Howden suggest there is a point where large asset management companies will forgo the usual formalities.
Kagiso Asset Management and Coronation Fund Managers had serious reservations about the funding structure for an acquisition proposed by AdvTech, while Abax’s top-rated asset manager Anthony Sedgwick was critical of Howden’s decision to hold back dividend payments when its cash coffers were spilling over.
Let’s hope these incidents are the start of a sea of change in the investment landscape. In the absence of formalised activist funds tilting at JSE companies it would be heartening for the investment public to hear a proactive institutional voice rather than the barely audible bleating at the tail end of a corporate event like a delisting or an ill-timed share buy-back.
Perhaps when the PIC — the biggest investment entity in the land — finds its voice, the institutional activism ball will really start rolling.
Of course, we must not lose sight of the valiant efforts undertaken by individual shareholder activists. The hitch here, though, is that often such efforts are not headline grabbing initiatives.
Shareholder activist Theo Botha railed hard against an arrangement between Pick n Pay and its holding company Pikwik, in which the operating company picked up the costs of the top company. It boiled down to a question of a few million rand over many years. Though Botha felt strongly about the matter, financial journalists would battle to convince their news editors to allocate space to such a “trivial” matter.
But the matter — which caused most participants to roll their eyes when it was raised at the Pick n Pay AGM — perhaps spoke to a bigger investment issue. This complacent corporate arrangement might have hinted at a wider complacency throughout Pick n Pay — as the group markedly underperformed rivals like Shoprite, Spar and Woolworths.
Botha also points out that it’s the activist’s lot to be unpopular with not only executives but other shareholders too.
Botha rattled cages at Sage and Super Group, questioning the sustainability of their business models when most other shareholders were content with generous dividend flows. Subsequent events showed Botha’s wariness was more than justified.
The bottom line is that all shareholders should be activists. There are obvious issues that even retail investors can raise at AGMs or with company boards.
Should a company consider a share split to increase share liquidity? Is a director really independent? Why has a company not changed auditors for over a decade? Are all workers in the company empowered?
❛❛ Perhaps when the PIC — SA’s biggest investment entity — finds its voice, the institutional activism ball will start rolling