Successful private investor activism in an emerging market

Abstract

Purpose Institutional investors in emerging markets are increasingly under pressure to integrate environmental, social and corporate governance considerations into their investment analyses and ownership practices. Old Mutual Investment Group (OMIG) is a South African-based institutional investor that has long been regarded as a pioneer in responsible investing. The purpose of this study was to examine the nature and effectiveness of OMIG's private shareholder activism endeavours over the period 1 January 2014 to 30 June 2018. Design/methodology/approach A unique database was constructed using proprietary, point-in-time data for 69 listed companies covering 283 private engagements. Binary logistic regressions were conducted to test the hypothesised relationships. Findings The majority of the private engagements centred on executive remuneration. This finding was not unexpected given the large and growing wage gap in South Africa. Close to two-thirds of OMIG’s private deliberations were successful. Engagement success was positively associated with a targeted company’s capacity to change and desire to protect its reputation. Research limitations/implications This study only investigated the private shareholder engagement actions of a single, well-resourced institutional investor. Practical implications The findings serve as an encouragement to other investors who are contemplating a more active approach to change unethical and unsustainable corporate policies and practices. Originality/value This unique analysis sheds light on the determinants and success of private shareholder activism in an emerging market.

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