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Institutional investors welcome activists’ input, Morrow Sodali survey finds

Global institutional investors are prepared to listen to activists' arguments, with 40% of respondents to a survey by Morrow Sodali also willing to reach out to activists over issues.

The global consulting firm, which specializes in shareholder services, corporate governance, proxy solicitation and capital markets transactions, said in its Institutional Investor survey 2017 that all participants in the survey — money managers and pension fund officials representing $24 trillion in assets — will communicate with activists. While each case is assessed individually by investors, close to 60% said they will listen to an activist only if approached. The remaining 40% suggested they will not only listen to activists reaching out to them but would also be willing to reach out to activists if they are not contacted.

The key driver of this support for activist campaigns is poor financial performance. The survey worked to identify other contributing factors and found 60% of respondents viewed poor governance practices as the most important contributing factor in lending support to activist claims and proposals. Companies not acting on previous shareholder dissent was cited by about half of respondents as an important factor.

When it comes to engaging with companies on environmental, social and governance issues, 35% of respondents were concerned about pay-for-performance, followed by board diversity and refreshment of a board, tied at 30% each. Climate change was a new topic, with half of respondents saying they will include the topic in 2017 engagement exercises with companies.

The survey was conducted in December and January. Respondents comprised 78% money managers and 22% pension fund officials. Half of participating investors were based in the U.K., 28% in the U.S., 18% in Europe excluding the U.K. and 4% in Asia. The number of respondents was not provided.

Comparative data for 2016 was not available by press time.