Is it the dawn of a new era for shareholder activism?

The Ukraine crisis has put the spotlight on how individual investors and consumers, large brands, corporates, and fund managers can make their views heard.

• Recent ii webinar for customers on shareholder power can be viewed here.

One small ray of light amid the devastating and heart-breaking events of recent weeks in Ukraine is the sheer power of financial activism that has been demonstrated at the individual level, corporate level, and governmental level.

This geopolitical and humanitarian crisis has firmly put the spotlight on how individual investors and consumers, large brands, corporates, and fund managers alike can make their views heard.

The Ukrainian government understand this acutely, publishing a list of 50 global brands still operating in Russia, including Johnson & Johnson and Burger King at time of writing.

Lee Wild, Head of Equity Strategy, interactive investor, explains: “We know economic sanctions and brand boycotts can help force change – the ones imposed against South Africa in the 1970s and 1980s are a textbook case. We know people power works: British students forced Barclays (LSE:BARC) to pull out of South Africa, and in the case of Russia, I’m sure there’ll be plenty of people happy to forgo their burger if it turns up the heat on a big brand.

“People power works, and we have more collective power than we think. Exactly the same applies to voting and - individuals and big corporates can flex their muscles, either using proxy votes or by turning up at the AGM. 2021 was the year we saw more green issues at company resolutions. That’s not going to change, but this year we could also start to see the governance issue extending more broadly, focusing much more on geopolitical issues as we look closer at where this interconnected world sits with our ethics. That’s my bet for 2022.

“We have not seen a European conflict like this in a very long time, and the ramifications will continue long after the conflict ends. Ultimately, investors need to ask themselves some big questions.

“You could even argue that every fund, now, is in some way, a ‘responsible’ or ethical fund,’ even if they would not have classified themselves, as such. Perhaps funds which have never considered the traditional Environmental Social Governance, or ‘ESG’, credentials are now having to face a new reality where, as agents of investors’ capital, they will have to consider more than just the direct financial impact, and risk, alone. We are all having to take responsibility for how our financial decisions impact the world around us.”

Becky O’Connor, Head of Pensions and Savings, interactive investor, says: “This could be a key moment for a new age of activism. Just as investors can make their shopping power count, they can also make their investments count. In the past, shareholder activism has been concentrated on single issues with individual companies. A key change now is that it’s now multiple companies across multiple issues, and the pressure is relentless.

“It is also coming from individual shareholders rather than the institutions, who are now acting as conduits for the views of the ultimate owners of the investments: us.”

Becky O’Connor, Head of Pensions and Savings, interactive investor, believes this marks a new era for the role of asset managers and platforms, and one they need to embrace quickly: “thanks to industry efforts to promote greater transparency in recent years, it is becoming easier to clearly see who is doing what on the things we care about, who the laggards are, and for individuals to act accordingly.”

At interactive investor, the UK’s second-largest DIY investment platform, empowering individual investors to use their voice has been a key priority. Since November 2021, ii has made it easier for its customers to vote and attend AGMs, switching on customers to its free shareholder voting service where previously it had been an ‘opt in’ service. For over a year, the platform has been running a campaign to raise the profile of voting and AGM issues amongst customers.

But we have also seen this at the governmental level – with world leaders condemning Russia’s actions through the increased implementation of sanctions.

Many big brands have also stood up and took action, by suspending business with Russia in response to the attack. These include influential global names such as Heineken (EURONEXT:HEIA), Kraft Heinz (NASDAQ:KHC), PlayStation, and Nintendo. The world will be watching as brands that have not yet taken a position, set out their intentions.

Lee Wild, Head of Equity Strategy, interactive investor, explains: “Perhaps some of these names are sitting in your portfolio. And to that, we say – do not miss your chance to have your voice heard, especially now when the stakes are so high. Keeping track of AGM dates, and votes, can give you a voice at these very critical moments.”

Crucial crunch vote at crucial times – keep an eye on those AGM dates – they might turn out to be more topical than you thought

Lee Wild, Head of Equity Strategy, interactive investor, explains: “Most AGMs pass without incident, but there has always been emotion and controversy.

“The vote on political donations at Caledonia Investments (LSE:CLDN)’ springs to mind as an example. It was a few years ago now, but a decision to donate money to the Conservative Party didn’t please everyone back in 2009 – not everyone wants their investments to be party political, after all.

“Around the same time, Prudential (LSE:PRU) shareholders got a chance to attack the then chief executive Tidjane Thiam over his failure to pull off the $35.5bn (£24bn) takeover of AIG's Asian life insurance arm. I was there, and it wasn’t pretty. He survived, but shareholders got a chance to make their views very clear!

“Last year, a resolution brought by shareholders asked Shell (LSE:SHEL) to align its targets with the Paris Climate Agreement and invest accordingly. Over 30% of shareholders voted in favour.

“And though the National Trust is not a listed company, last year’s lively AGM saw a vote go 2 to 1 against trail hunting on Trust land.”

Retail Investors CAN help set the agenda

This week, it was announced that activist investing platform, Tulipshare, filed a shareholder resolution with Johnson & Johnson calling for the termination of global sales of the company’s talc-based Baby Powder, which will now be voted on at the upcoming AGM. The proposal, however, was originally submitted on behalf of a Tulipshare investor – therefore showcasing the power even just one shareholder can have.

On 24 February, interactive investor, held a webinar for customers, Shareholder Power, on retail investor engagement. The event was hosted by Merryn Somerset Webb, editor in chief of Money Week and author of Share Power. Also speaking was Elisabeth Scott, Chair of the Association of Investment Companies (AIC), Catherine Howarth, CEO, Share Action, and Lee Wild, Head of Markets, interactive investor.

ii will be doing some follow up work on this, but the event can be watched here.