Abstract
This study investigated the nature of institutional shareholder activism in South Africa with a particular focus on proxy voting as a public form of shareholder discontent. A total of 24 510 votes cast by 17 local investment managementcompanies in 2013 were analysed. Interviews were also conducted with selected investment managers to gain more insight into the proxy voting process at their companies. Based on this data, it was concluded that investment managers preferred to engage with investee companies in private and viewed proxy voting as the last link in the shareholder activism chain. As a result, only 6.6 per cent of all votes were ‘against’ resolutions tabled by 347 JSE-listed companies in 2013. Resolutions regarding shareholders’ endorsement of companies’ remuneration policies; the election and re-election of directors, particularly those serving on audit committees; and the issuance of ordinary shares elicited the most opposition. Companies that were excluded from the JSE’s Socially Responsible Investment Index in 2013 attracted significantly more oppositionthan their counterparts who were included in the index when seeking shareholder approval on the election and re-election of directors and the placing of shares under the control of directors. The same applied to companies that had low environmental, social and governance disclosure scores in 2013 as regards the issuance of shares. It is recommended, amongst others, that shareholder activism in South Africa be promoted by enhancing investor education and effecting some regulatory changes.
Highlights
IntroductionShareholder activists are essentially investors who use their equity stake in a company (called the investee company) to hold managers accountable on ethical and ESG considerations
The framework of the Australian Institute of Company Directors, for example, discusses the legal underpinnings governing the relationship between boards, shareholders and executives and provides guidance to institutional investors on creating effective communication strategies
Require local institutional investors to be exempt from collusion charges when collectively engaging with investee companies (Greenblo, 2014a)
Summary
Shareholder activists are essentially investors who use their equity stake in a company (called the investee company) to hold managers accountable on ethical and ESG considerations. They can do so by using a combination of private and public mechanisms. Asset owners typically delegate their voting power to asset managers ( called investment managers), reference being made to proxy voting Shareholders can voice their discontent about matters by voting against resolutions or by submitting their own resolutions for consideration at the AGM. Given that researchers do not have access to data on private engagements between shareholders and investee companies, the primary objective of this study was to investigate proxy voting as a public shareholder activism mechanism. Recommendations relevant to pension fund trustees, investment management companies, consultants, academics, and the South African regulator are put forward
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