The risks and rewards of retail shareholder activism

Published at Feb 2, 2017, in Question and Answer

HotCopper Holdings Limited (ASX:HOT) Chairman Steve James outlines the risks and rewards of a rise in retail shareholder activism in Australia’s financial markets, speaking with The Capital Network’s Lelde Smits at Australian Securities Exchange (ASX:ASX).

Lelde Smits: Hello I’m Lelde Smits for The Capital Network. Joining me at the Australian Securities Exchange headquarters in Sydney is the Chairman of HotCopper Holdings Limited (ASX:HOT), Steve James. Steve welcome.

Steve James: Thank you Lelde.

Lelde Smits: The power that financial institutions have over listed companies, such as ASX-listed companies, is increasingly being challenged by the rise of the retail investors. Can you explain what you believe is behind that shift and also where the opportunities lie.

Steve James: Sure Lelde. I think we live in an increasingly transparent world. We’ve seen the rise on online broking, we’ve seen the rise of self-directed investors and that is a trend that isn’t going to go away. And, as investors have become more educated and tools like HotCopper and other services empower those investors to have a say, companies are now on notice that they need to be very transparent in their behaviours and in their reporting or it is very likely that they’re going to be held to account.

Lelde Smits: Absolutely. They certainly are on notice. Companies have always known that they need to be vigilant, but now more than ever. There are risks if you fail to communicate and action accordingly. What do you believe those biggest risks are for companies if they do fail to listen to their shareholders?

Steve James: There are very serious legal consequences but there are also very serious secondary considerations perhaps, like shareholder revolt. And, forums and social media of all kinds are now playing a much bigger role in impacts on executives and stock prices.

Lelde Smits: Certainly, so if we look at 2016 it’s been a record year for shareholder activism.

Steve James: Yes.

Lelde Smits: How do see that landscape changing or evolving in the following year?

Steve James: The opportunities lie in companies putting much more work into their investor relations activities and keeping shareholders better informed and working with shareholder groups [such as Australian Shareholders Association and Australian Investors Association] and bodies such as the ASX to increase transparency.

Lelde Smits: Excellent, well I hope all shareholders and listed companies have been listening to that. Thank you for your insights.

Steve James: Thank you Lelde.

The views and opinions expressed in this article are those of Steve James. You should not act on these views or opinions without undertaking your own due diligence as to the voracity and accuracy of his views and opinions. These views and opinions may be wrong or misleading.

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