engagement et activisme actionnarial | Page 2

Me Jessica Zhang propose un billet de blogue sur l’impact de la COVID-19 sur l’activisme actionnarial au Canada : « Impact of COVID-19 on Shareholder Activism » (7 avril 2020). Comme elle le rappelle aux CA, « Sharp declines in stock prices due to COVID-19 are making companies more vulnerable to shareholder activism and hostile attacks ».

Extrait :

Shareholder Activism in Canada

While shareholder activism is traditionally less prevalent in Canada than in the United States, Canada can be an attractive jurisdiction for shareholder activism due to its shareholder-friendly regulatory framework that includes:

• rights of shareholder to requisition meetings with a 5% ownership interest;
• ability of shareholders to communicate with up to 15 shareholders without the requirement to file and mail proxy solicitation materials or publicly disclose their solicitation intentions;
• ability of shareholders to accumulate 10% of a company’s shares before disclosing their interest;
• ability of shareholders to include proposals on the election of directors in management proxy circulars;
• entitlement to shareholder lists and ability to be reimbursed for costs associated with proxy contests; and
• fewer structural defences in Canada than in the United States.

Preparing for Shareholder Activism

While the primary focus of many companies in the current environment is on their employee health and safety, business continuity and financial stability, boards of directors and management should not lose sight of the potential increases in shareholder activism and be prepared to defend against any hostile attacks.

1. Shareholder Communication and Engagement. Shareholder communication and engagement is crucial to maintaining shareholder confidence. It is important for companies to be able to respond to shareholders in a meaningful manner, address concerns and misinformation and ensure open and transparent communication with their shareholders. A corporation’s board and management should prepare key messages with respect to the impacts of COVID-19 on the company, what steps the company is taking to mitigate the impacts and risks, and address its liquidity needs, the overall health of its business, and the company’s ability to rebound from the crisis. Companies should utilize public disclosure as an opportunity to engage with shareholders and communicate results, strategy, objectives and opportunities in a clear manner to enhance shareholder confidence. It is also important to ensure that the messages delivered provide a transparent assessment of the current and anticipated future impacts of COVID-19 on the company and not to create unrealistic and unreasonable expectations for shareholders.
2. Activist Response Team. Companies should consider establishing an internal team dedicated to dealing with activist shareholders and developing immediate and comprehensive responses to potential shareholder activism. This team should be composed of the most knowledgeable internal resources, including the chief financial officer, general counsel, and additional senior personnel from the finance, investor relations, and corporate communications departments. It should also leverage external resources, including external counsel, proxy solicitation firms, and public relations firms to assist in defending the corporate strategy and objectives, and to co-ordinate coherent and timely responses to shareholders.
3. Monitor and Assess. Management should regularly monitor and review the company’s shareholder base, objectives and investment strategies of the shareholders as well as changes in trading patterns in the company’s stock (e.g. stock surveillance), in order to stay alert to early signs of an opportunistic acquiror. Additionally, management should conduct a comprehensive assessment of the company’s vulnerabilities to shareholder activism and identify any activists that could be potentially interested in targeting the company.
4. Shareholder Rights Plan. A shareholder rights plan, also known as a poison pill, is a defensive measure used by public companies to defend against hostile takeover attempts by third parties. Shareholder rights plans in Canada have not historically been effective in stopping hostile bids but have been effective in providing boards with more time to consider strategic alternatives. In preparation for shareholder activism or takeover threats, companies that do not already have a shareholder rights plan may consider preparing one and keeping it “on the shelf” (fully drafted and ready for adoption). TSX requires the adoption of a shareholder rights plan to be ratified by shareholders within six months of adoption. Institutional Shareholder Services (“ISS”) will generally support a shareholder-approved rights plan that conforms to its “new generation” rights plan best practice guidelines. Similarly, Glass Lewis will generally support shareholder rights plans adopted in response to COVID-19 and the related economic crisis if the plans have a duration limited to one year or less and the company discloses a sound rationale for adoption of the plan as a result of COVID-19.
5. Advance Notice Requirements. An advance notice provision affords protection against a “surprise attack” at or shortly before a shareholders’ meeting as it requires shareholders to provide advance notice to the company if they wish to propose nominees to the board of directors. In preparation for shareholder activism or takeover threats, companies may consider adopting an advance notice board policy or provisions in the articles or bylaws that require advance notice of any intention to propose nominees for directors. ISS and Glass Lewis will generally support advance notice provisions that meet their guidelines.
6. Corporate Governance. Corporate governance weaknesses is one of the attributes that tend to attract activist shareholders. Companies should ensure corporate governance standards are frequently evaluated and strictly followed to prevent activists from exploiting weaknesses or inconsistencies. Management should stay up-to-date on the evolving legal and regulatory developments as well as voting recommendations by proxy advisory firms, such as ISS and Glass Lewis, and consider how to best comply with best practices guidelines.
7. Employee Investment. Employees are generally among the company’s most loyal investors. The decline in stock prices can be an opportunity for companies to revise existing or implement new incentive programs to encourage employee investment in the company by enhancing stock purchase plan provisions and amending long-term incentive compensation plans.

À la prochaine…

Une belle comparaison entre les droits étatsuniens et chinois à propos des droits d’inspection des actionnaires dans : R. Huang et R. Thomas, « The Law and Practice of Shareholder Inspection Rights: A Comparative Analysis of China and the U.S. », European Corporate Governance Institute – Law Working Paper No. 499/2020.

Extrait :

Shareholder inspection rights allow a shareholder to access relevant documents and records of their company, so as to address the problem of information asymmetry inherent in the corporate form, and facilitate monitoring of the operation of the company and, if necessary, the bringing of further action for remedies.

In the United States (U.S.), all states have now codified shareholder inspection rights, albeit with some significant differences amongst them. Drawing upon overseas experiences such as the U.S. law, China has introduced the regime of shareholder inspection rights, but with some important adaptions made to its local environment. By providing access to relevant information, inspection rights have the potential to serve as an effective mechanism to deal with different types of agency problems in the company: not only the manager–shareholder conflict that is the most serious agency problem in the U.S., but also the conflict between majority and minority shareholders which mainly plagues the corporate governance system in China.

However, due to institutional differences, variations may exist between the two jurisdictions as to how inspection rights are structured and enforced. In our recent article, we thus compare shareholder inspection rights in China and the U.S. (that is mostly represented by Delaware, the preeminent corporate law jurisdiction in the U.S.), both in terms of the law on the books and the law in practice.

(…) Overall, we find that shareholder inspection rights play an important role in both the Chinese and US legal systems. While Chinese corporate governance and American corporate governance face different sets of agency cost problems, improved shareholder monitoring creates important benefits in both of them. There exist, however, some important differences in the structure and enforcement of the inspection rights regime between the two jurisdictions, which can be largely explained by reference to their different contexts of political economy.

À la prochaine…

L’influent ICGN a pris récemment position sur les conséquences du COVID-19 pour la gouvernance d’entreprise, sachant que ce réseau international fait de cette pandémie un risque systémique (rien de moins !). Vous pourrez lire les préconisation de l’ICGN dans le document suivant : ICGN Viewpoint, « Coronavirus as a new systemic risk: implications for corporate governance and investor stewardship », 12 mars 2020.

Extrait concernant les investisseurs

Despite these negative economic events investors should avoid focusing on the crisis in terms of its short-term shareholder value implications. It is here where a long-term perspective, and perhaps a grounding ethics and values more generally, should also guide investor responses. In the language of modern finance, this may be less an opportunity for investors seeking alpha generation in individual companies than it is a question of addressing ‘beta’ issues—the volatility/stability of the markets and financial system as a whole. This may be fiendishly complicated, but an important guiding principle for investors relates to their fundamental fiduciary duty of care to their beneficiaries. This confirms the importance of taking a long-term perspective, since most ICGN Members, and large institutional investors more generally, are managing assets for pension plans or retirement saving plans, where the investment horizon is intrinsically long-term, or in theory infinite.

It is beyond the scope of this Viewpoint to suggest specific investment or trading strategies for investors in addressing the impacts of COVID-19. There is no generic solution. These will differ depending on individual investor mandates and beneficiary requirements. But from the perspective of investor stewardship and fiduciary duty — and consistent with ICGN’s Global Stewardship Principles and Policy Priorities3 — it is fair to suggest that in reacting to this crisis investors should generally seek to maintain an approach that promotes long-term investment horizons and sustainable value creation for individual companies and markets.

As a practical matter this requires investors to appreciate that companies will be facing difficult questions in response to the impacts of COVID-19. The first priority for managers and boards will be to ensure the company’s own financial sustainability. Investors must also understand that capital allocation questions may surface where compromise is required. Companies may have to choose between cutting dividend payments, cutting capital spending or cutting costs, possibly leading to redundancies. Investors should demonstrate support for companies as they navigate potentially acute financial threats and market pressures. Investors should also avoid encouraging companies to undertake undue risks that might provide a short-term investor benefit but could also jeopardise a company’s financial stability or the sustainability of its business model. This reflects not only some level of enlightened self-interest, but also the moral imperative to contribute positively to the broader threats to public health and social stability.

À la prochaine…