Shareholder activism - who is running the agenda ?

Traditionally when reading and hearing about shareholder activism, images of small shareholder groups, retirees and mum and dad investors petitioning company executives at Annual General Meetings has been the most likely image. The 'activism' landscape has now substantially changed however and shareholder activism now encompasses a much wider definition of participants.

Overseas giant mutual and exchange traded funds have been backing activist hedge funds exerting pressure on publicly listed companies by aggressively calling for change - the ultimate goal to force greater effort to unlock shareholder value and to shake up complacent boards. Current estimates of the amount of funds invested in activist funds in the United States are over $300 billion and the old model of passive asset managers has started to disappear. This is a trend which has not really materialised in Australia with the opposite being more likely than not - characterised by the top ten shareholder groups (usually financial institutions, trustee corporations or investment funds) in ASX listed companies being extremely reluctant to take a position unless absolutely forced.  The question which now is being asked in financial circles is whether this is an ongoing structural trend or merely a cyclical response to a low-growth, low return financial environment. If a structural trend is underway this reveals a major shift in influence as shareholders are clearly demanding a greater active say in corporate strategy than previous decades. Confidence in many boards of listed companies has taken a major fall in recent years due to perceptions that change is not being implemented fast enough. Will Australia join this trend ? Given current shareholder activity, there is a high chance a similar picture, albeit on a smaller scale, will evolve here.