Lazard’s: Shareholder Activism – ESG Will Become A “Trojan Horse” To Advance Campaigns Where Management Has Failed

Johnny HopkinsActivist InvestingLeave a Comment

Lazard’s recently released their Review of Shareholder Activism – Q3 2020 which included answers to the following questions:

  1. When will activism fully return?
  2. Who will be most vulnerable?
  3. Will there be a new activist playbook?

The new activist playbook includes ESG becoming a “trojan horse” to advance campaigns where management has failed. Here’s an excerpt from the review:

When will activism fully return?

  • Today’s modest activity levels reflect a cautious view of the speed and nature of the economic recovery, relatively high equity valuations and potential negative perceptions of activism in time of pandemic
  • Expect increased campaign volume with evidence of economic and market recovery, potentially as soon as Q4 2020 ahead of the opening of Director nomination windows for many companies

Who will be most vulnerable?

  • Activists will likely continue to target companies with asymmetric risk return profiles and a catalyst for near-term value realization
  • Following the pandemic, activists will likely target companies with:
    − Complex or vulnerable supply chains
    − Misaligned portfolios ill-suited to the recovery economy
    − Balance sheets or capital allocation policies misaligned with current market and operating environment
    − A track record indicative of failed risk and crisis management
    − ESG issues:

    • Workforce resiliency, safety and flexibility issues
    • Boards lacking the skill set for the future
    • Failure to address industry-specific ESG issues

Will there be a new activist playbook?

  • Activists will use traditional tactics to unlock value, including streamlining portfolios, capital allocation, cost cutting and improving operations, as well as share buybacks for companies whose share price recovery continues to lag
  • ESG will become a “trojan horse” to advance campaigns where management has failed to deliver sector leading performance and ESG appears sub-par
    − Expect to see an increase in “fresh perspectives,” “ a modern approach,” “what harm can it do to add us” campaigns under the guise of ESG
  • Board representation will be a more frequent ask in campaigns

You can read the entire review here:


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