When activists infiltrate companies

Mike Cannon-Brookes is a young Australian billionaire. In late May, he managed to bring down his country’s most polluting company – AGL Energy, Australia’s biggest electricity producer – by defeating his split plan. The company is expected to keep its coal plants running until 2045, but Cannon-Brookes hopeswell anticipate its closure. foray into it form of shareholder activism.

Australia, where the sun shines in abundance, harbors fertile ground for solar energy. But this island country of Oceania is above all the realm of a less brilliant energy, coal. Australia still holds the award for the country that produces the most greenhouse gas emissions per capita from coal, according to a report by British think tank Ember.

For Mike Cannon-Brookes, Australia’s fourth-largest fortune teller ($10.6 billion) but also a techno mogul turned climate activist, the country must get out of its dependence and turn to renewable energy. He is what is called an “activist shareholder” – a category of activists who use their equity stake in a company to influence its activities.

In February, the billionaire tried to buy AGL along with Canadian asset management firm Brookfield Asset Management to force the company to align its business with Paris Agreement goals. But the takeover attempt failed.

Mr. Cannon-Brookes then bought more than 11% of AGL’s shares, becoming the company’s largest shareholder. And after a campaign to get other shareholders to oppose the company’s plan to separate its retail electricity operations from those of its generating units, Cannon-Brookes finally got what he wanted.

On Monday, May 30, AGL said it would not go ahead with its split plan, admitting that it is unlikely to get enough shareholder votes to pass the deal. The company’s CEO submitted his resignation.

In a statement, AGL said it would conduct a review of its strategic direction with a focus on potential decarbonization initiatives and would discuss further with Grok Ventures, Mr. Cannon-Brookes, to find a way forward. “A great victory for environmentalists”, according to the street newspaper.

The climate in terms of shareholder demands

The case of the AGL is far from isolated. And shareholder activism “is not a new phenomenon,” recalls Ivan Tchotourian, a professor at Laval University specializing in governance and corporate social responsibility.

“The means of action are varied. It often starts with dialogue. If that doesn’t work, activists can make their demands public through the press. They can introduce resolutions in assembly. But they can also put pressure on disinvesting, for example, that’s what the Fund is doing when it says it’s turning its back on oil”, explains Tchotourian.

Activists don’t pursue the same goals either, he specifies. Some are motivated by environmental and social goals, but others – think hedge funds (hedge funds) — have purely pecuniary purposes.

However, activism around environmental, social and governance (ESG) criteria is popular, as evidenced by the season of annual meetings that is drawing to a close. This period, which runs from April to mid-June, is important for companies and their shareholders, who find an opportunity to make themselves heard.

This year, shareholders of US listed companies filed a record 529 resolutions related to ESG criteria, according to February data contained in a report published by the As You Sow and Sustainable Investments Institute. This number represents an increase of approximately 20% compared to last year. Of these proposed resolutions, 145 were directly related to environment and climate change issues, an increase of around 60% over the previous year.

Activist approaches don’t always work. Just think of the recent case of Carl Icahn, known for inspiring Gordon Gecko in the film. Wall Street, which has just suffered a failure against McDonald’s. The American multibillionaire criticized the company for failing to live up to a promise it made in 2012 to require its suppliers to gradually stop using gestation crates that are too small for sows. But shareholders did not act on animal welfare concerns raised by the businessman.

However, sometimes these types of campaigns work. For example, in mid-May, Home Depot shareholders voted to approve proposals calling for an independent audit report on possible racial discrimination within the company, as well as a report on its links to deforestation due to its timber supply. Sometimes these campaigns even cause a stir.

As in June 2021, when militant company Engine No. 1 took on Exxon and beat the oil giant in the election of three new board members.

not everyone’s taste

Of course, this type of action also has its share of detractors.

Mainly on the side of conservatives, who see this as an obstacle to business performance. Former US Vice President Mike Pence recently criticized activist investor campaigns aimed at forcing companies like Exxon Mobil Corp. follow socially responsible investment principles, claiming that they elevate the goals of the left above the interests of corporations and their employees.

But there are also the “disillusioned”, those who do not believe that change can happen within companies, says Ivan Tchotourian. “There are obviously fatalistic people who don’t believe that anymore, because of the greenwashing carried out by many companies. But I think that doesn’t end the movement, because there are people who continue to believe in it”, he believes.

to see on video

Leave a Comment