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How to effectively manage shareholder activism or revolt

With the 2024 Annual General Meeting (AGM) season around the corner and shareholder voices louder than ever, companies need to be prepared to listen and engage effectively. 

Data from consultancy firm Alvarez & Marsal found that the number of activist campaigns in Europe has increased 12% year-on-year.  

With the heat turned up high for boards to manage potential shareholder revolt, we share our advice on how they can prepare and create meaningful, productive dialogues with shareholders. 

Disruption vs engagement 

Many boards are worried about the impact of activists disrupting meetings in 2024, however it’s important to remember the difference between an unruly investor who wants to cause disruption and one who just wants to make their voice heard.  

For instance, although Environmental, Social and Governance (ESG) activist campaigns are predicted to drop compared to previous years, sustainability and executive pay will remain topics of questioning for engaged shareholders and companies must remain prepared for this. 

Concerns are evolving as 2024 will bring a new wave of challenges. With the rise of AI signalling concerns around ethical use and social policy issues, Apple and Disney are already set to face shareholder proposals at their AGMs this year. Setting the tone for companies across the board, they must remain vigilant about this line of questioning.  

By setting a code of conduct for distinguishing between disruption and debate, businesses can actively encourage open discussion while monitoring potentially disruptive attendees. This allows them to be equipped to manage revolt without stifling the voices of engaged shareholders. 

Preparing for activism

Within AGM preparation, beyond setting a clear code of conduct, companies can rehearse activist scenarios to prepare for potential revolt. 

As we know, the core purpose of AGMs is to make business-critical decisions and anyone whose motive is to hinder this process should be removed accordingly.

Scenario planning can include streamlining removal protocols, how-to's for diplomatically engaging with the disruptive attendee as well as managing the remaining audience to calmly return to normal proceedings.  

In markets like Sweden, we’ve even seen the emergence of pre-AGMs, where shareholders can discuss issues with the board ahead of the meeting, allowing the event to focus more on discussion and voting. This approach enhances transparency and connectivity between shareholders and board members prior to the main event. 

It's important to note that although occurrences of shareholder revolt notably make headlines, they are not very common. Being prepared for this potential is a fundamental part of maintaining the board’s confidence.  

Beyond the AGM

By investing in investor relations events and maintaining regular contact with key investor groups, organisations can address shareholder concerns throughout the year, preventing issues from escalating and potentially spilling over into the AGM.  

By staying tuned to evolving concerns, utilising technology for continuous dialogue, and implementing effective scenario planning, companies can not only weather the rare potential of revolt, but in turn build stronger, more resilient relationships with their stakeholders.