Making the best of shareholder activism

Navigating the shareholder spring.

Imagine the scene. You’re ready to sleepwalk your way through the yearly AGM ritual, you’re expecting a few shareholders to show up purely for the sarnies and the most exciting part of your day will be deciding what to wear. All of a sudden, reality breaks in and remuneration is in the cross hairs. The Association of British Insurers (ABI) issues a red top alert, ISS (Institutional Shareholder Services) issues a "vote against" recommendation, your shareholders are emboldened by the shareholder spring and vote against the remuneration report. Press coverage is destructive, you face public humiliation and although the vote isn’t binding, there’s so much pressure on you that you become yet another victim of anger about boardroom pay, another name in the hall of shame.

Sound familiar? Ask Sly Bailey of Trinity Mirror or Andrew Moss of Aviva, who are now seeking employment. Or Sir Martin Sorrell of WPP or Ralph Topping of William Hill, both of whom had their pay packets pummelled by shareholder anger.

Smaller companies have also been engulfed by this fury and are, in many respects, even more vulnerable. Cairn Energy took a roasting with 67 per cent votes against and 10 per cent abstentions on its pay report. AIM company Central Rand Gold was rocked by a 75 per cent revolt against its pay policy. Small cap Pendragon faced an ABI red top alert and an embarrassing climb down after a "no" vote.

That was the Shareholder Spring of 2012.

Shareholder votes on pay may only be advisory but directors who don’t listen to the message risk the ultimate sanction of being voted out. And it’s not just votes against which matter. Abstentions are often used to show a yellow card which directors should read as a clear signal to get round the table and talk to investors.

Remuneration consultants may be having a feeding frenzy advising on pay policy but the key area under the spotlight right now is the communication disconnect between companies and their shareholders.

Help is at hand

Investor activism is a way of shareholders flexing their muscles and demanding that you engage. Companies large and small should take to heart the need to talk to and listen to their shareholders so that they don’t end up with battle lines drawn, leadership resignations or picking up the pieces afterwards. Nobody wants to be hauled over the coals in public.

It can be tough being a CEO or an FD. You have to run the company, make hard decisions in a difficult economic climate, get your teams to implement them, deal with multiple claims on your time and somehow still find time to keep your investors happy. There are only 24 hours in a day and if you’re a smaller quoted company, it’s likely that your investor relations team is CEO and FD, both of you running at full stretch with no investor relations officer to support you.

The good news is that help is at hand. CEOs and FDs who want to avoid the sapping skirmishes of the shareholder spring can use a five-piece investor communications kitbag to put themselves on the front foot, selecting tools based on the amount of time available. Forward-planning helps smooth the way and reduces the risk of a public drubbing. And, it gives you a fabulous opportunity to bring your shareholders on side as cheerleaders for your company.

Tool #1 - Shareholder engagement

Dialogue matters. Planned, long term engagement puts companies in the driving seat. Regular dialogue with shareholders creates an atmosphere of understanding and builds trust; it enables directors to inspire confidence in the company and in the integrity of the executive team as you set expectations and educate investors about the value drivers of your business.

ABI director general Otto Thoresen told a recent Treasury Select Committee that company engagement with shareholders is “beginning to change but it’s not uniform and not fast enough”. Companies who only communicate when they have to are missing out on a great opportunity. Let’s face it, if you bump into someone you hardly know each year at an AGM and they ask you to lend them £1,000 for a business you know nothing about, you wouldn’t do it. If you meet a contact on a regular basis who tells you about their business in a way that excites and interests you, explains its strategy, prospects and progress against plan, then if that person asks you to lend them £1,000, there’s a higher chance that you’ll do it.

The reporting calendar provides the perfect framework for shareholder engagement. Quarterly results and interim management statements are part of a regular reporting cycle, giving you the opportunity to showcase your company to the market and helping reduce share price volatility.

Tool #2 - Perception study

Everybody wants to know what other people think of them and companies are no different. If directors want to manage their company’s profile and valuation, it’s essential to understand shareholders’ opinions about the company, the leadership team and the strategy so that you can ensure no nasty surprises at a vote.

John McFarlane, chairman of Aviva, lights the way. As he picks up the pieces in the wake of his former CEO’s resignation, his message to shareholders of 5 July recognises how important it is to find out what investors think about a company. McFarlane emphasises the importance of communicating and of listening when he says “over the past few weeks, I have met with our major shareholders and, in addition to their disappointment over our share performance, I believe there are legitimate concerns”.

Companies must communicate with buy side shareholders, listen to them and understand them, preferably before things get sticky. Even for companies with a good record of active shareholder engagement, a perception study is a powerful tool because it enables the board to take stock of the company’s current positioning in the eyes of the investment audience and it drives out those areas which need to be focused on in their IR strategy. It comes into its own when a board is unsure of where shareholder sentiment lies in the months ahead of a vote and wants to test shareholder mood, with time to act on the findings.

Tool #3 - Engagement with voting agencies

As the time of a vote draws near, companies may be blindsided by proxy voting recommendations. Proxy voting agencies are a section of the market many directors are not aware of and which require a nuanced understanding. They exist in the middle ground between a buy side shareholder and that shareholder’s vote.

Take the case of William Hill, which faced a difficult vote on its CEO’s retention package. Chairman Gareth Davis commented, "We consulted with the majority of our major shareholders and most recognised the importance of what was being put in place for William Hill's future. Whilst many of our largest shareholders supported the Remuneration Report resolution, one of the most influential vote advisory bodies recommended a vote against. It appears that a large number of shareholders across our share register voted in line with this recommendation.”

Savvy directors do not have to sit back and wait for a vote recommendation to happen to them: they can take the initiative and interact direct to ensure that the voting agency is in full possession of accurate information about the company and any areas of concern.

Tool #4 - Take it to the market

When a company has exhausted all other routes and still has concerns about shareholder understanding, then a board which is confident of its position can take it to the market. It can develop a tactical plan to proactively put information into the public domain to ensure full disclosure and transparency amongst all shareholders about any areas which may otherwise prove contentious. A recent example is easyJet, which earlier this year published and explained its remuneration policy and provided justifiable reasons for poor NED attendance at board meetings.

Tool #5 –Be ready for the future proposals on directors’ pay

The final tool in your kitbag is ensuring that your fellow board members are fully up to speed with Vince Cable’s proposals on directors pay. They are intended to address the disconnect between pay and performance and unsurprisingly they move the UK towards the US system of Say-On-Pay. Boards should proactively address the implications of these proposals as they start to firm up.

Conclusion

CEOs and FDs have some great weapons in their kitbag which they can organise like a military campaign to create winning strategies without hostilities. The messages emerging from the current levels of shareholder activism are that investor communication is all. Proactive, high levels of engagement and understanding are essential. Alignment of board strategy and shareholder interest is the guiding principle.

Rachel Maguire is the Investor Communications Director at Arko Iris. This article first appeared in economia.

Photograph: Getty Images

Rachel Maguire is the Investor Communications Director at Arko Iris

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Meet Anne Marie Waters - the Ukip politician too extreme for Nigel Farage

In January 2016, Waters launched Pegida UK with former EDL frontman Steven Yaxley-Lennon (aka Tommy Robinson). 

There are few people in British political life who can be attacked from the left by Nigel Farage. Yet that is where Anne Marie Waters has found herself. And by the end of September she could well be the new leader of Ukip, a party almost synonymous with its beer-swilling, chain-smoking former leader.

Waters’s political journey is a curious one. She started out on the political left, but like Oswald Mosley before her, has since veered dramatically to the right. That, however, is where the similarities end. Waters is Irish, agnostic, a lesbian and a self-proclaimed feminist.

But it is her politics – rather than who she is – that have caused a stir among Ukip’s old guard. Former leader Paul Nuttall has said that her views make him “uncomfortable” while Farage has claimed Ukip is “finished” if, under her leadership, it becomes an anti-Islam party.

In her rhetoric, Waters echoes groups such as the English Defence League (EDL) and Britain First. She has called Islam “evil” and her leadership manifesto claims that the religion has turned Britain into a “fearful and censorious society”. Waters wants the banning of the burqa, the closure of all sharia councils and a temporary freeze on all immigration.

She started life in Dublin before moving to Germany in her teens to work as an au pair. Waters also lived in the Netherlands before returning to Britain to study journalism at Nottingham Trent University, graduating in 2003. She subsequently gained a second degree in law. It was then, she says, that she first learnt about Islam, which she claims treats women “like absolute dirt”. Now 39, Waters is a full-time campaigner who lives in Essex with her two dogs and her partner who is an accountant.

Waters’s first spell of serious activism was with the campaign group One Law for All, a secularist organisation fronted by the Iranian feminist and human rights activist Maryam Namazie. Waters resigned in November 2013 after four years with the organisation. According to Namazie, Waters left due to political disagreements over whether the group should collaborate with members of far-right groups.

In April 2014, Waters founded Sharia Watch UK and, in January 2016, she launched Pegida UK with former EDL frontman Steven Yaxley-Lennon (aka Tommy Robinson). The group was established as a British chapter of the German-based organisation and was set up to counter what it called the “Islamisation of our countries”. By the summer of 2016, it had petered out.

Waters twice stood unsuccessfully to become a Labour parliamentary candidate. Today, she says she could not back Labour due to its “betrayal of women” and “betrayal of the country” over Islam. After joining Ukip in 2014, she first ran for political office in the Lambeth council election, where she finished in ninth place. At the 2015 general election, Waters stood as the party’s candidate in Lewisham East, finishing third with 9.1 per cent of the vote. She was chosen to stand again in the 2016 London Assembly elections but was deselected after her role in Pegida UK became public. Waters was also prevented from standing in Lewisham East at the 2017 general election after Ukip’s then-leader Nuttall publicly intervened.

The current favourite of the 11 candidates standing to succeed Nuttall is deputy leader Peter Whittle, with Waters in second. Some had hoped the party’s top brass would ban her from standing but last week its national executive approved her campaign.

Due to an expected low turnout, the leadership contest is unpredictable. Last November, Nuttall was elected with just 9,622 votes. More than 1,000 new members reportedly joined Ukip in a two-week period earlier this year, prompting fears of far-right entryism.

Mike Hookem MEP has resigned as Ukip’s deputy whip over Waters’ candidacy, saying he would not “turn a blind eye” to extremism. By contrast, chief whip, MEP Stuart Agnew, is a supporter and has likened her to Joan of Arc. Waters is also working closely on her campaign with Jack Buckby, a former BNP activist and one of the few candidates to run against Labour in the by-election for Jo Cox’s former seat of Batley and Spen. Robinson is another backer.

Peculiarly for someone running to be the leader of a party, Waters does not appear to relish public attention. “I’m not a limelight person,” she recently told the Times. “I don’t like being phoned all the time.”

The journalist Jamie Bartlett, who was invited to the initial launch of Pegida UK in Luton in 2015, said of Waters: “She failed to remember the date of the demo. Her head lolled, her words were slurred, and she appeared to almost fall asleep while Tommy [Robinson] was speaking. After 10 minutes it all ground to an uneasy halt.”

In an age when authenticity is everything, it would be a mistake to underestimate yet another unconventional politician. But perhaps British Muslims shouldn’t panic about Anne Marie Waters just yet.

James Bloodworth is editor of Left Foot Forward

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear