Financial institutions have traditionally been shielded from movements of shareholder activists because of industry regulation. This may be changing. We are now seeing activists begin to target financial institutions, and that will be a challenge for anyone who isn’t expecting it.
We define “activism” as activities by one or more of a publicly-traded company’s shareholders that are intended to result in one or more changes. While we haven’t seen many large corporate restructurings in the headlines, that doesn’t mean that activists aren’t rolling up their sleeves. Boards shouldn’t count on regulation to protect them.
In PwC’s 2015 Annual Corporate Directors Survey, we found that only 33% of FS directors report being at least somewhat concerned about an activist intervention, compared to 48% of all industry directors.1 But maybe the rest of them should be. After all, from the period of 1994-2010 approximately one-third of public banks have been subject to some type of activist action.2
For a brief introduction into the world of shareholder activism, take a look at “Shareholder activism—are you prepared to respond?” This short article provides some introductory insight into the recent movement of hedge fund activists. It also provides initial thoughts on how to make your institution less appealing as an activist target.
For a deeper look into shareholder activism, read PwC’s Governance Insights Center’s paper “Shareholder activism - Who, what, when, and how?” This paper discusses a few of the techniques used by activists to push forward their agenda, as well as the goals of these techniques.
For a look into the mind of an activist, read “Be Your Own Activist Investor.” This article, from strategy+business, examines 10 trends to reduce costs and expand revenue, as well as how activists are increasing share value in the institutions they target. Learn the techniques they’re using and make your institution less of a target.
For a discussion about responding to an activist already on the board, read “Shareholder activism - Strategies for mitigating risk and responding effectively.” This Strategy& article discusses techniques for dealing with an activist board member. Explore the process an activist investor goes through so you can stay ahead of the game.
Eventually, an activist is likely to make a move on a financial institution. The goal is to make sure that it’s not yours. By preparing now, you can reap the benefits that an activist might bring, without headaches.
1 PwC, “Across the boards: Views from the financial services boardroom,” May 2016, www.pwc.com/fsi.
2 The Federal Reserve Bank of Kansas City, “Shareholder Activism in Banking,” August 2015,www.kansascityfed.org, accessed May 17, 2016.