When: Thursday, 9th February, 2006
Where: The Royal College of Gynaecologists, Nuffield Hall, 27 Sussex Place, London, UK
First results of an ongoing independent study of shareholder activism in the UK have found that activism can produce outcomes that generate significant returns for shareholders. The work was co-authored by Professor Marco Becht, ECARES, Université Libre de Bruxelles, Professor Julian Franks, Centre for Corporate Governance, London Business School, Professor Colin Mayer, Said Business School, and Professor Stefano Rossi, Stockholm School of Economics. The results of the study were presented at a conference at the London Business School on February 9th that was organised jointly by the London Business School Centre for Corporate Governance, the ECGI and the Journal of Applied Corporate Finance.
Many commentators have been sceptical about the value of shareholder activism, believing it to be disruptive and short-termist. Evidence about its effectiveness has been inconclusive or found activism to generate no net-returns, in particular pension fund activism in the United States. Legal scholars have pointed to the US legal and institutional environment as a possible explanation for the missing link. Legal scholars have also argued that the UK provides the ideal setting for shareholder activism to work, given the legal and cultural environment, making the UK an ideal “laboratory” for activism research.
The team focused on the Hermes UK Focus Fund (“the Fund”), which invests in companies that are fundamentally sound but whose shares have underperformed the market as a result of strategic, governance or financial structuring weaknesses and where Hermes believes shareholder involvement can be the catalyst for change and result in improved performance.
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