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Shareholder Activism and Corporate Governance

Public activity as measured in hard numbers by ActivistInsight, is down significantly in Q1 2020. However, it is a tenuous metric, especially during times of severe dislocation. The market turmoil caused by COVID-19 creates an abundance of opportunities for activists: valuations have plummeted almost across the board and stark differences between companies´ ability to cope with the crisis are becoming increasingly apparent. Moreover, the pandemic will lead to a reassessment of corporate vulnerabilities, and open new doors for activists. ESG is likely to become one of those new doors, with social (‘S’) aspects gaining importance during the pandemic.

Shareholder Activism and Corporate Governance

For now, company guidance may seem almost irrelevant in an environment where no-one knows what the future holds. However, even this extraordinary state of uncertainty does not absolve companies completely from trying to at least educate their investors and guide them to the extent that they can. Moreover, let us hope that in a few weeks’ time, when there is at least a little bit more clarity, the question will arise again as to what to tell the market.

Shareholder Activism and Corporate Governance

While the past decade has seen a steady increase of shareholder activism in the UK, the true battleground has been continental Europe, which has witnessed a dramatic surge in activity.

Shareholder Activism and Corporate Governance

Top executives in Western firms earn much more than their Japanese counterparts, the multiple usually is 10 or even more. This fact is well known. Japanese CEOs are primarily expected to work for their company and the company`s stakeholders but not for their own wallet. Earning much more than 10 times the average employee salary is perceived as obscene and rarely happens.

Shareholder Activism and Corporate Governance

Japan Inc. has outstripped European companies in overseas M&A during the first half of 2018 according to figures of Deallogic looking at vice-versa FDI between the U.S. , Europe and Japan.

Shareholder Activism and Corporate Governance

Japan`s corporate governance code was introduced in 2015 and has already brought many changes. The number of non-core business carve-out deals and take private deals has clearly increased since then. I would even argue that the dismantling of Toshiba would not have occurred the way it did without the earlier introduction of this code incl. stricter disclosure rules.