Central Bank of Bahrain

Waqf Fund discusses Shareholder Activism in its Seventh Corporate Governance Workshop

Manama, Bahrain – 25th October 2017 – “Shareholder activism is a trend that is here to stay and no region is completely immune to it,” Dr. Nabil El-Hage, a corporate governance expert and former professor at Harvard Business School, informed the participants of the 7th Corporate Governance (CG) workshop organized by the Waqf Fund. 24 chairpersons, CEOs and board members of Waqf Fund member institutions attended the session.

Dr. El-Hage presented five cases including a hostile takeover attempt, attacks on large and well-known companies and the issue of fiduciary duty owed to clients by underwriters. These included diverse industry segments such as railroad, technology, fast moving consumer goods (FMCG) sector, real estate investment trusts (REITs) and an online toy selling company. The key lessons learned from these case studies are mentioned below:

1.  As a director, regardless of who nominated you or how you got elected, your fiduciary duty is to the company and all its shareholders. 

2.  When the interest of one group of shareholders conflicts with those of another, the directors are to look after the interest of the company.

3.  Conflicted directors must abstain from voting on related-party transactions.

4.  Shareholder activism is a trend that is not going away.

5.  Board composition is one of many considerations when determining your vulnerability to activist attacks. A weak board, with unsophisticated members, is more likely to be seen as vulnerable and beatable.

6.  Social media makes it easier to reach a large number of shareholders to win a proxy fight.

7.  Successful performance, both operating and financial, is your best defense.

8.  Credibility with shareholders is not gained overnight.  Long-term shareholder engagement is an absolute must if your shareholders are to be expected to support you in a crunch.

9.  Investor relations is now a board job. Active shareholder and stakeholder engagement is the responsibility of the board.

10. Board relationships with management must become more transparent.

11. Entrenched boards are vulnerable and not sustainable.

12. Create shareholder value, or risk being thrown out.

13. Trust is a key ingredient – and cannot be won during a crisis.

14. Listen to your shareholders; if your strategy is not working, you may need to change course and / or bring in new blood.

15. Boards should ask advisors to notify them of potential conflicts. While such conflicts may be unavoidable, boards should be vigilant about identifying and managing conflicts.

16. When your regulator does not regulate you…regulate yourself. This is one of the many important roles of the board.

The participants of the workshop praised the case study format, the quality of the trainer and the discussion during the session. Some of the participants wanted to have more cases from the region while others suggested having more cases from the banking sector.

The Waqf Fund, which hosted the workshop, has been serving the Islamic finance industry in Bahrain since 2006. It offers several programs targeted to Islamic finance practitioners, Shari’ah resources and other stakeholders. The Waqf Fund has 22 member institutions including the Central Bank of Bahrain. 

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