Shareholder Activism

As published in CK Momentum Issue 10 (Click here to download)

Discontent with a company’s performance can lead to the shareholders taking action to change or influence the direction of the company.

Examples of shareholder activism in Australia are limited due to it being a relatively new trend, but one well known example is the public campaign in 2014 by fund managers BT Investment Management, Perpetual and Allan Gray to spill retailer David Jones’ Board of Directors by alleging that the Board has no retail experience. The activists were somewhat successful, with 2 directors stepping down.

Although the concept of shareholder activism is still new to many Boards in Australia, it is increasing, with the number of companies targeted in Australia in 2015 up by 27% from the previous year according to some commentators.


Not all shareholder activism is negative, as it can lead to positive outcomes for the company and its shareholders. However, it can be damaging to a company’s reputation and value.

One of the most effective ways of minimising the risk of shareholder activism is to build and manage strong relationships with shareholders, particularly shareholders who hold a large number of shares. Other ways of minimising the risk of shareholder activism are:

  • know and monitor the register of members;
  • and any requests by shareholders to view the register of members (CLICK HERE to read our recent article “Shareholders’ Rights to Inspect the Books of the Company”);
  • engaging in open and transparent communication with shareholders regarding financial performance and other aspects of the company’s business;
  • displaying a willingness to consider shareholders’ input on the company’s business;
  • setting clear objectives for the company so that in the event an activist challenges the Board’s position, the Board can refer to the company’s objectives and how they have been met; and
  • preparing a response strategy to follow in the event of shareholder activity.


How to respond to shareholder activism will depend on the nature of the activity.  If the activity is commenced privately, for example by the activist approaching the Board with a proposal, then the following steps should be taken:

  • listen to the shareholder’s proposal and try to understand their concerns and objectives;
  • agree with the shareholder on how future communications on the issue will occur (to minimise the risk of the shareholder taking their proposal public);
  • consider whether the proposal is something that can be implemented and, if it can, then whether it is in the best interests of all shareholders; and
  • privately communicate the Board’s decision about whether or not to implement the proposal to the shareholder. If the Board’s decision is not to implement the proposal, then the decision should be accompanied by a well reasoned argument as to why it is not being implemented.

This course of action may still lead to the shareholder taking their proposal public and attempting to lobby other members, but it will at least allow the Board to understand the shareholder’s position and provide time to prepare for any action.

If the activity is commenced publicly, by engaging the media or other shareholders directly without first consulting the Board, then a company’s response is even more important. The response should identify why the company opposes the action sought and should be supported by logical arguments. In the case of activity being commenced publicly, a response strategy, as suggested above, is a critical tool for any company to have ready to implement on short notice to ensure its position is communicated swiftly and clearly.


Shareholder activism is still in its infancy in Australia. However, it is increasing, and it is expected that in the near future, institutional investors will be set up for the sole purpose of engaging in shareholder activism, so it is important for companies to take steps to minimise their vulnerability and to have a plan in place for immediate execution if shareholders become active.

This bulletin is produced as general information in summary for clients and subscribers and should not be relied upon as a substitute for detailed legal advice or as a basis for formulating business or other decisions. ClarkeKann asserts copyright over the contents of this document. This bulletin is produced by ClarkeKann. It is intended to provide general information in summary form on legal topics, current at the time of publication. The contents do not constitute legal advice and should not be relied upon as such. Formal legal advice should be sought in particular matters. Liability limited by a scheme approved under professional standards legislation. Privacy Policy


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