THE LAW REVIEWS: THE SHAREHOLDER RIGHTS AND ACTIVISM REVIEW: SOUTH AFRICAN CHAPTER
While globally and locally there has been a dip in activist campaigns due to the impact of the covid-19 pandemic, activity is expected to pick up as the economy recovers.
Recent events, including some high-profile corporate scandals and governance failures, have resulted in further calls for shareholder bases that are less apathetic in their approach to management accountability and the pursuit of shareholder value. Shareholder demands for greater levels of accountability, transparency and return on investment are on the rise. A failure to engage with sophisticated activist shareholders, or provide them with the levels of transparency demanded, may leave the board exposed to shareholder disapproval sparked by shareholder activists who are armed with an increased amount of information and a variety of regulatory rights and protections.
Shareholders are becoming increasingly active on such matters as diversity, board composition, performance and tenure, executive remuneration policies, transparency, ESG and sustainability. This is being driven in part by increasing civic action on high levels of inequality, climate and sustainability, ongoing debates about corporate purpose, enhanced reporting and disclosure requirements, and the recent changes introduced by the King Code.
Issues relating to ESG and sustainability are the focus of many recent campaigns and will remain high on the agenda. We expect local and international institutional investors, in particular pension funds, mutual funds and insurers, to play an increasingly active and pivotal role in influencing corporate strategy and M&A with reference to sustainability and ESG factors. Careful consideration of these issues has become essential to corporate strategy and governance. Companies that pay inadequate attention to these issues are increasingly likely to become exposed to business, credit, market, reputational, legal and other risks, which could have a material adverse effect on their businesses over the medium- to long-term.Read further