Protecting Long-Term Shareholder Interests In Activist Engagements

Published 10-Oct-2016

Key Takeaways

• State Street Global Advisors (SSGA) recognizes that activists can bring positive change to underperforming companies, especially when boards or management ignore investor concerns about poor corporate governance practices.

• As near permanent capital, SSGA’s main goal is to ensure that activists are helping to promote long-term value creation in whatever way they choose to engage with companies.

• However, a recent rise in settlement agreements entered into rapidly between boards and activists and without the voice of long-term shareholders concerns us, as we see evidence of short-term priorities compromising longer-term interests.

• We believe boards should protect the interests of long-term shareholders in all activist situations, and carefully evaluate settlement agreements. In particular boards need to consider the interests of long-term shareholders as they assess: 1) duration of the agreements; 2) ownership thresholds and holding period requirements for continued board representation; and 3) risk to the company’s share price posed by a lack of board oversight on significant pledging activities by activists serving on the board.

• To help inform and explain our voting decisions on the election of directors in activist situations, we will assess settlement agreements according to how they address the concerns highlighted in this paper.

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