While shareholder activism activity in the U.S. has recently leveled off, activity outside of the country continues to increase significantly. In 2018 we saw an increase in activist campaigns in Europe and Canada, but perhaps the largest increase was seen in Asia Pacific countries Japan, Korea and Australia. Activism in Asia reached a record high, and shows no signs of slowing down, and it’s clear that activism in Asia Pacific will continue to grow as western investors are diving into a market that was largely untapped.
Until recently, Asian companies have typically resisted listening to shareholder activist ideas, but the tide is changing. Company management and boards are starting to realize that they need to be their own internal activist and make preparations before they ever attract the attention of a western investor. What types of initiatives, assessments, engagement programs and communication strategies should they be instituting to position themselves properly, and what should they do when an activist comes calling?
Tsuyoshi Maruki is the CEO at Strategic Capital Inc.
Investors in Asian companies have traditionally taken a more passive approach, with public criticism of the company being rare. Complex ownership structures, cross-shareholding, government participation and family control have always insulated corporations, but now have become targets of criticism by shareholder activists. As western activists look to Asia for new opportunities, and domestic investors are becoming more comfortable with the concept, management teams and boards in the region are being forced to listen. This panel will explore the current state of shareholder activism in Asia Pacific.
Moderator: Ronald Orol, Senior Editor, The Deal
Panelist: David Hunker, Managing Director, Head of Shareholder Activism Defense, J.P. Morgan
Panelist: James Lim, Senior Research Analyst, Asia Equity Research Team, Dalton Investments
Panelist: John Trammell, Managing Director, Global Strategic Initiatives, Symphony Financial Partners
Panelist: Steve Wolosky, Partner, Activist & Equity Investment Practice Co-Chair, Olshan Frome Wolosky
South Korea’s chaebol, or family-run conglomerates Hyundai, Samsung, LG and SK, drive global industries like semiconductors, telecommunications, shipbuilding and automobiles. Yet their poor corporate governance records, byzantine cross-shareholding structures, and hostility to shareholders belie their global success. Recently, the chaebol groups have begun the succession to their third-generation heirs — a troubled project that has ignited a wave of shareholder challenges and political scandals in South Korea — including the impeachment of South Korea’s former president Park Geun-hye, and the bribery conviction of Samsung heir Jay Y. Lee. As shareholder activists set out to reform the chaebol, Korea Inc. has reached a turning point. Will these industrial titans accede to a growing chorus of shareholders, clearing the road for cleaner governance and higher dividends? Or will they hunker down with their distressed model of dynastic rule?
Interviewer: Steve Gelsi, Senior Reporter, The Deal
Speaker: Geoffrey Cain, Author and Foreign Correspondent
In the first half of 2019, there were 42 Japanese companies subject to activist demands, just slightly less than the record 53 targeted in all of 2018. U.S. and some local activists often target Japanese corporate groups, known as keiretsus, which are large conglomerates that are run by an owner or family. Campaigns often focus on corruption, nepotism or what insurgent managers perceive as hoarding of cash. Many barriers still remain for activists operating in Japan including: administrative restrictions on foreigners attending AGMs or calling extraordinary shareholder meetings; proxy voting procedure issues and the lack of a substantial pool of qualified outside director candidates. The country’s vague legal and regulatory framework also raises concerns. Even so, the growth of western institutional investor capital in Japan is making the country more attractive to insurgents.
Moderator: Alicia Ogawa, Director, Project on Japanese Corporate Governance and Stewardship, Columbia Business School’s Center on Japanese Economy and Business
Panelist: Ryota Kimura, Chief Representative, The Japan Exchange Group
Panelist: Tsuyoshi Maruki, CEO, Strategic Capital Inc.
Panelist: James Rosenwald, Co-Founder, Portfolio Manager, Dalton Investments
Panelist: Christian Sealey, Chief Operating Officer, Morrow Sodali (Australia)
Panelist: Dan Underwood, CEO, Ashton Consulting International Corporate Communications Tokyo
Australia also experienced a record high number of activist engagements in 2018, with 78 companies targeted, perhaps because the legal framework in Australia is activist-friendly. Shareholders with 5 percent of a company can convene a general meeting, and the country’s “two-strikes law” means that an entire company board can face re-election if shareholders disagree with how much executives are being paid. Much of the activism in Australia has mainly targeted small, micro and nano-cap stocks, but the success of Elliott Management’ campaign against BHP could mean that activists could now see opportunity in large-cap stocks.
Moderator: Lisa Botter, Assistant Managing Editor, The Deal
Panelist: Maria Leftakis, CEO, Australia, Morrow Sodali
Panelist: Jeffrey Pierce, Managing Partner, Snow Park Capital Partners
The Abe Administration implemented a stewardship code in 2014, a governance code in 2015 and reforms to the country’s merger and leveraged buyout rules, this year. Foreign investors and activist funds, who love to see corporate spinoffs, have been flooding the country with capital investments. In addition, takeover bids are becoming more common in Japan, especially in small cap companies. This trend is being used increasingly by foreign buyers, both strategic and financial, despite the fact that specific requirements remain vague, especially to those unfamiliar with Japanese practice. This panel examines the takeover process in Japan, and explores what corporates and investors need to know to navigate the murky waters. Panelists also explores how some U.S. activist investors have been developing relationships with Japanese government officials, stock exchanges and domestic investors to drive their insurgencies forward.
Moderator: Ronald Orol, Senior Editor, The Deal
Panelist: Takeo Aso, Chief Investment Officer, Misaki Capital
Panelist: Drew Edwards, Portfolio Manager & CEO, Usonian Investments
Panelist: Alicia Ogawa, Director, Project on Japanese Corporate Governance and Stewardship, Columbia Business School’s Center on Japanese Economy and Business
When an activist calls, companies can respond in variety of ways, and experiences in the U.S. and Europe provide examples of the most effective and successful engagement practices. How should corporate executives and directors respond to and engage with shareholder activist proposals and demands? Will we be seeing more private equity firms begin to embrace activism in a public context? Should the company dig in and fight or agree to a settlement? What type of governance initiatives should companies be establishing to proactively position themselves and be their own “internal activist”?
Moderator: Steve Gelsi, Senior Reporter, The Deal
Panelist: Naran Burchinow, Senior Vice President, General Counsel, and Secretary, The Andersons, Inc.
Panelist: Daniel Jonas, Executive Vice President, Legal Affairs, General Counsel and Secretary, CONMED Corporation
Panelist: Richard Mansouri, Managing Member, Ridge Road Asset Management
Panelist: Michael Paradise, Executive Vice President & General Counsel, Steve Madden
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This conference will provide predictions and perspectives on post-pandemic dealmaking in the UK and Europe.
This seminar explores how shareholder activists and the companies they target are shifting gears amid the coronavirus pandemic.