The status of shareholder activism in South Africa : 2015 and beyond

Abstract

Shareholder activism has become a dominant force in corporate activities today, and is a contentious topic in many corporate boardrooms. The purpose of this research is to provide a better understanding of shareholder activism in South Africa. The research achieves this by exploring the perspectives of company directors as they relate to the different aspects of shareholder activism and the impact thereof on South African corporates. The research furthermore seeks to establish directors' roles and responsibilities in dealing with shareholder activists, and the manner in which they believe they should prepare for and respond to shareholder activism. A review of relevant literature shed some light onto various aspects of shareholder activism, including the key drivers, frequent demands and strategies commonly used by shareholder activists. In order to garner the desired perspectives, 15 semi-structured, in-depth interviews were conducted with the directors of listed companies across multiple industries. The study differentiated between executive and non-executive directors in terms of their roles and responsibilities in dealing with shareholder activists. Four major themes emerged from the study, namely the type of shareholder prevalent in corporate governance activism, focusing on the firm s governance reforms; that there exists a level of optimism about the effectiveness of shareholder activism in corporate South Africa; the main activist type identified was the long-term institutional investor who prefers to engage directly with directors to resolve any shareholder related issues; and lastly, that most boards have strategies in place to effectively deal with shareholder activists. This study revealed a void in academic literature in South Africa in terms of how directors should prepare for and respond to shareholder activism. This research attempted to address this shortcoming by using the empirical evidence to create and propose a guideline for directors, in order that they may prepare for and respond to shareholder activism in the future.