The corporate response to shareholder activism
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The corporate response to shareholder activism Christoph Van der Elst
© ERA 2014
Abstract Shareholders activism is no longer a typical American phenomenon. Many European companies have become familiar with shareholder actions too. Shareholders are making use of their rights and act against management deficiencies. It is the duty of the board of directors to guard against these actions of shareholders. The response lies not in raising protective shields but in the development of risk management systems incorporating shareholder activism risks. Keywords Shareholder activism · Shareholder rights · Risk management system
1 Introduction “We currently have a large position in APPLE. We believe the company to be extremely undervalued. Spoke to Tim Cook today. More to come.” Followed by “Had a nice conversation with Tim Cook today. Discussed my opinion that a larger buyback should be done now. We plan to speak again shortly.” Were two tweets that Carl Icahn sent shortly after the discussion he had as an important shareholder articulating his discontentment with the management of Apple piling up large amounts of cash.1 It
1 These tweets can be found at http://blogs.wsj.com/moneybeat/2013/08/13/carl-icahn-we-currently-have-a
-large-position-in-apple/, last consulted February 10, 2014. Both protagonists settled their dispute and claimed victory because Apple did return cash to its shareholders although not as much as Icahn required. In the meantime Icahn is addressing eBay and he orders the divestment of PayPal (The Economist, “Anything you can do, Icahn can do better”, 15 February 2014, pp. 51–52).
B
C. Van der Elst, Professor of Business Law and Economics ( ) Tilburg University and University of Ghent, Department of Business Law, Faculty of Law, Tilburg University, Tilburg, The Netherlands e-mail: [email protected]
C. Van der Elst
illustrates the long account of growing shareholder activism in the United States in recent years. Shareholder activism is neither an exclusively American nor a new phenomenon. Many European companies have heard the expression of the voice of shareholders over the last decade.2 In 2013, companies in many European countries were confronted with shareholder discontentment. RHJ International, the Belgian investment company that acquired Kleinwort Benson received a letter from Equilibria Capital which acquired around 4 % of the shares, attacking RHJI’s mergers and acquisitions policy and management compensation packages. In 2012, Vincent Bolloré accumulated 5 % of the voting rights in Vivendi, the French media and telecommunications company. He was elected a supervisory board member and divided the company into two operational units, disclosing the shareholder value.3 In 2010, the German real estate company GSW elected John von Freyend as chairman of the supervisory board. In March 2013, van Freyend managed to have a Mr. Kottman who had had several executive positions at IVG, a large German real estate company, as chief executive officer of GSW.4 This gave rise to opposition on
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