Ac­tivists find their voice

Financial Mail - Investors Monthly - - Contents -

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?

Get ac­tive!

❛❛ Per­haps when the PIC — SA’s big­gest in­vest­ment en­tity — finds its voice, the in­sti­tu­tional ac­tivism ball will start rolling

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