What is Shareholder Advocacy?

Michael de Tocqueville Chief Investment Officer at Advocate discusses  "Shareholder Advocacy" or "Shareholder Activism" 

Shareholder Advocacy, or Shareholder Activism as its better known in the U.S., is a reaction against underperforming Boards and their managerial appointees.

“Shareholder Activism” represents a range of activities by one or more of a publicly traded corporation’s shareholders that are intended to result in some change in the corporation. The activities fall along a spectrum based on the significance of the desired change and the assertiveness of the investors’ activities. On the more aggressive end of the spectrum is hedge fund activism that seeks a significant change to the company’s strategy, financial structure, management, or board. On the other end of the spectrum are one-on-one engagements between shareholders and companies triggered by the 3-strike rule on remuneration.

The failure of Boards to realise the true value of a business is difficult to address, particularly where a Board is prepared to spend shareholders’ money to protect its position.

Shareholder Advocacy is in effect, a revolt against entrenched corporate mismanagement; it works by developing positive and detailed solutions to unlock shareholder value. The core activity of advocacy is to engage fellow shareholders and the Board in order to bring about the necessary changes to improve performance. Underperformance can often be detected in companies that have excellent corporate governance and positive share performance because of other factors that limit potential value. Detailed advocacy analysis will reveal the causes of the underperformance and provide solutions.

There are a number of triggers that drive advocacy and usually more than one of the following is present in an underperforming company:

Ineffective or misaligned strategy

Poor corporate governance

Imbalanced remuneration

Missed opportunities

Poor risk management

Poor capital management

Inadequate Board qualifications

Operational mismanagement

Disaffected co-investors

Related party conflicts

“It is up to shareholders to step up to the plate and demand changes at their companies. For too long and for a variety of reasons, shareholders have been complicit in allowing management excesses and incompetence by not taking a stand.” Carl Icahn.

Advocate Partners has been established specifically to undertake active “shareholder advocacy” as a means of achieving superior returns from share market investments. We believe Advocate's investment objective is best described as follows:

" Investing in companies with identifiable deficiencies, then implementing high governance and operational standards with an unyielding focus on shareholder objectives, translates into greater shareholder returns "

Advocate is not a fund manager in that we are not establishing, nor managing an investment portfolio. We are a highly concentrated investor, looking to grow by attracting co-investors ('partners') into each focused & unique investment opportunity that Advocate Partners will facilitate.

Based in Melbourne, Australia, our investment team will research and implement its investment strategy, which is to seek out undervalued and/or under-managed companies which we consider offer the best opportunities for superior investment returns, using our active shareholder advocacy approach. 

The Advocate connected team comprises specialists with extensive experience and expertise in investment management, strategy, corporate finance, administration, forensic analysis, risk management and audit.