Boards under siege are granting belated recognition of genuine activist fund managers such as Simon Marais of Allan Gray formerly Orbis.
"As the new kingmaker of the Australian sharemarket, Simon Marais of funds management group Allan Gray will be even more closely watched by boards of directors and investment bankers.
It is a different kind of shareholder activism to what has gone before.
It is particularly aggressive, it makes full use of the media and, if it is associated with a private equity bidder, it can put a company under siege". YES!
Interesting piece appeared in smartcompany.com.au today - Why shareholders are getting more demanding. It was originally published by LeadingCompany, which is a relatively new voice in Australian corporate commentary.
Some snippets relevant to PaperlinX and with added comments:
"Shareholders activism is on the rise, here and overseas, fuelled by new laws that give shareholders greater influence and power, by low share prices and dividends, and by a growing use of the media to agitate for change".
"This activism is not limited to voting down executive salary packages – although this is on the rise – it extends to agitating for chief executives or directors to be removed, and accepting offers to sell the company against the recommendations of the board".
"Some fund managers – notably, but not solely, Allan Gray (formerly Orbis) – are breaking the mold of their typically compliant peers to call for change in poorly-performing companies in their portfolios".
(1) Spotless sold out from under board
"Against the wishes of the board, shareholders of the cleaning and facility management company, Spotless, voted to sell the company to a private equity group, Pacific Equity Partners.
Spotless chairman, Peter Smedley, fought against the takeover for five months, but eventually succumbed after shareholders threatened to take the matter to an extraordinary general meeting, fearing that a protracted battle would force the share price even lower. Smedley is now demanding an overhaul of the takeover laws".
(2) PaperlinX chair nearly unseated
"Harry Boon, the widely-respected chair of paper-maker, PaperlinX, held onto his job by a whisker after shareholders agitated for the board to remove him in March.
Shareholders were not really interested in Boon's scalp; they wanted the CEO, Toby Marchant. During four years of his leadership, the share price fell 98% and the company lost $1.13 billion.
The shareholders lost the vote in the end, but Simon Marais, of Allan Gray, told LeadingCompany that he thought the shareholders' point had been clearly made anyway. Marchant continues in the role with the threat of another shareholder revolt hanging over his head". [If Harry Boon doesn't soon read the mood of the market, he'll be described as "the formerly widely-respected chair"].
(3) Billabong chief ousted
"Just last week, Ted Kunkel, the chair of surfwear company Billabong International, doused mounting shareholder anger by ousting the company's CEO of 20 years, Derek O'Neill, and replacing him with former CEO of Target, Launa Inman.
Kunkel managed to stave off analyst criticism of the board and himself by replacing O'Neill with the well-credentialed Inman, who had already spent months consulting to the struggling company, hit with a large fall in the share price and plummeting underlying net profits".
The article quoted four Australian companies. The three quoted above have strong Melbourne connections with Spotless and PaperlinX domiciled here and Ted Kunkel a former Chief Executive Officer of Foster's Group Limited from 1992 to 2004.
It's not limited to PaperlinX
Here's what respected columist Robert Gottliebsen wrote recently: Whinging CEOs [and Chairman] equal terrible returns
This is a suicidal and short-term strategy which is against the interests of long-term superannuation members. But I can sympathise with the institutions. Instead of being visionaries, Australian chief executives are starting to become a race of moaners rather than adapters".