Diversity at boardroom level blunts activist attacks, survey data suggests

Jonathan Boyd
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Professional services firm Alvares & Marshal says in its latest research into shareholder activism in Europe that there is evidence having a more diverse board across age and gender can blunt the attacks of activist investors.

The conclusion is contained in its latest A&M Activist Alert , which suggests that while the age of a director does not influence the risk of an activist approach, diversity can help deter activists, but only if the age range is not too great. Increasing the number of women on a board is also associated with a reduced risk of shareholder activism, the services provider says.

Malcolm McKenzie, managing director and head of European Corporate Transformation Services, at A&M, said: “A lack of diversity in the boardroom leads to suboptimal decisions which in turn can prompt activist approaches. Our research shows that age range and gender are two factors to consider when appointing directors. Boards that encourage diversity of thinking are likely to foster more resilient companies, armed with the right tools to stay ahead of the competition and avoid activist targeting.”

Review of activism by numbers in 2018*

Companies publicly targeted in 2018 Total no. of companies Total no. of companies with market cap of $200m+
Europe 130 90
UK 36 20

* Data from Activist Insight

The latest Activist Alert also points to the UK being a hotbed of activism in the European region, accounting forr about a third of all public activism out of a survey of some 148 companies.

A&M points to a number of factors driving activism in the region, including uneven performance between divisions within companies leading activists to seek improvements in or sales of these divisions; and a heavy concentration of conglomerates in the industrials sectors, which is attracting activists.

However, activists are becoming less interested in the consumer sector, particularly retail, where companies have simply become too weak, and energy companies, which have benefitted from recover in commodities prices, which have enabled them to strengthen profits and share prices.

While the UK accounts for 56 of the 148 companies identified as at risk of activism, other markets highlighted include Germany, France, Italy and Benelux.

 

Jonathan Boyd
Author spotlight

Jonathan Boyd

Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope.

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