Rise in shareholder activism sparks debate
July 17, 2014
A LatAm-specific form of shareholder activism is rising sharply, say market observers
A spurt of attempts by minority shareholders to influence corporate management is sparking debate over the implications for Latin America’s stock markets.
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Photo source: David Goehring
Some of the most high-profile recent cases of activism in Latin America include Cartica Capital’s dispute with CorpBanca over its merger with Itau Chile, and Tempo Capital’s protests against the terms of the merger between Oi and Portugal Telecom.
Investors like Cartica and Tempo argue their actions could have a positive effect on regional stock markets.
Others argue that across Latin America, further advances in governance are necessary for investors to gain comfort buying stakes in the region's corporate securities. Increased awareness of shareholders’ rights can improve transparency and how corporate managers interact with shareholders, they said.
Yet some are sounding the alarm. Monique Skruzny, a founding partner of media and investor relations advisory firm MBS Value Partners, said there are examples of minority shareholders in Brazilian companies steering a positive turnaround after gaining seats on boards. But she questioned whether independent experts, rather than stock pickers, are better placed to decide on strategy.
“I worry when I see a lot of activists with little experience on boards of directors,” she said. Some activist investors in Brazil have been savvier than corporates at using local media, she added: "Management needs the tools and ability to make its cases, too.”
Brazil's securities regulator, the CVM, expressed cautious optimism on the rise of Latin American shareholder activism: “The existence of shareholder activism is a natural process and may bring very positive results,” it told LatinFinance. “When the different players involved are duly conscious of their roles, dialogues are extremely productive, technical, and contribute effectively to the capital markets' evolution.” LF
See the full article in the latest issue of LatinFinance here: The shareholder reformation