Shareholders are not just chasing dividends anymore, but are increasingly values-based investing and demanding a voice. A clear example of this, shareholder activism is no longer considered a fringe, reactive tactic, but is increasingly a strategic tool used by mainstream shareholders to influence corporate strategy, decision-making, governance, and risk management. 

Globally, there is a noticeable uptick in shareholder activism. A recent local example is that of a shareholder of SkyCity Entertainment Group suing former executives and directors for adverse findings and fines to the tune of AU$67m from Australasian casino regulators. While generally less pervasive in New Zealand, recent local examples demonstrate that shareholder activism is also being deployed in New Zealand. 

This article discusses how shareholder activism operates, including recent examples of shareholder activism in New Zealand, and recommendations for how companies should respond.

What is shareholder activism?

Shareholders of a company have various rights under the Companies Act 1993. Unless a company’s constitution provides otherwise, shareholders’ rights include being able to: 

• Approve matters like the nomination or removal of directors.
• Approve by special resolution a major transaction, the adoption, alteration or revocation of a company’s constitution, or the amalgamation or liquidation of the company.
• Receive dividends or distributions proportionate to their shareholding.
• Propose matters for discussion or resolution at shareholders’ meetings, subject to notice requirements.
• Sell or transfer their shares.
• Receive and inspect company records.

Shareholder activism is when shareholders of a company use their shareholders’ rights to influence the board’s decisions, whether it be changes in corporate governance, executive pay, environmental or social practices, or strategic direction. Often, shareholder activism focuses on:

• Poor governance, particularly the review of related party transactions, transparency deficiencies from the board or management when reporting to shareholders, and the announcement of sudden, significant financial write-downs.
• Targeted campaigns to ‘vote no’ to shareholder resolutions.
• Change-of-board campaigns or director-appointment campaigns.
• Remuneration of directors and/or management.
• Hedge fund shareholder activism (i.e. where hedge funds use their equity stakes in public companies to push for changes they believe will increase shareholder value – or, in some cases, their own returns).
• Strategies to maximise long-term shareholder value.
• Formal suggestions submitted by way of shareholder proposals.

Typically, shareholder activists tend to be long-term shareholders (e.g. institutional investors) and/or dissatisfied minority shareholders, with industry participants also occasionally engaging in activism for strategic purposes.

Recent examples of shareholder activism in New Zealand

Given New Zealand’s small business economy, shareholder activism often occurs on a private basis, with only a small portion of shareholder activism developing into a public campaign. However, throughout 2024, there was an observable increase in shareholder activism in New Zealand. Generally, it focused on board composition and shareholder litigation – a departure from shareholder activism in the past, which often focused on environmental, social, and governance (‘ESG’) matters.

• PGG Wrightson Limited: Agria (Singapore) Pte Limited (‘Agria’), the company’s largest shareholder, issued a notice to replace three of the company’s directors with four of its nominees, in what the NZSA considered "one of the worst cases of board interference by a majority shareholder in the last few years”. Following intense backlash and a resolution from the NZSA to prevent Agria from consolidating board control, Agria withdrew its shareholder proposal.
• Contact Energy: Faced pressure from institutional investors to accelerate its decarbonisation roadmap and improve climate-related disclosures. Shareholders also raised concerns about executive remuneration alignment with ESG goals.
• Mercury NZ: Investors pushed for more transparency around its renewable energy investments and long-term emissions targets. Some shareholder proposals focused on linking executive pay to sustainability metrics.
• Kiwi Property Group: Experienced shareholder engagement around asset divestment strategies and capital allocation, particularly in light of shifting commercial real estate trends.
• Others: Shareholders have also turned to litigation to address complaints and in some cases, defend the company. For example, minority shareholders of the Du Val Property Group brought a representative action against the Financial Markets Authority for its decision to place the company into receivership, and Chris Mason, a minority shareholder of Burger Fuel (with support from other minority shareholders) filed a notice of opposition to Burger Fuel’s intended distribution of NZ$4.077 million to shareholders.

How should companies respond to shareholder activism?

When confronted with shareholder activism, and at a base level, directors need to respond in a manner consistent with their overarching legislative and fiduciary duties to act in good faith and in the company’s best interests. This includes engaging constructively with shareholders, particularly where grievances are raised by institutional investors, or as part of coordinated shareholder activist campaigns.

There are no absolute structural defences to prevent a company from being the target of shareholder activism, though companies can adopt certain preventative strategies to reduce the likelihood and impact of shareholder activism, and respond effectively, including:

• Strengthening corporate governance and management practices to avoid being the target of shareholder activism. 
• Establishing company policies that outline clear internal procedures for handling shareholder activism or takeover proposals. These should address continuous disclosure obligations and include detailed protocols for engagement – such as pre-approved messaging, documentation and record-keeping requirements, and confidentiality safeguards.
• Maintaining an effective investor relations strategy, to provide regular market updates, clear communication about the company’s business strategy, and provide shareholders with opportunities to genuinely ask questions.
• Proactively monitoring the share register to detect unusual trading patterns or shifts in shareholder composition that may indicate shareholder activist posturing.
• Ensuring that the company is attuned to the interests of major shareholders.
• Considering constructive engagement via private settlements to accommodate shareholder activist proposals, as such outcomes are more efficient and less disruptive than public campaigns.

What next?

The uptick in shareholder activism globally signals a broader shift in shareholder behaviour, investor influence, and decision-making at large. Shareholders are demonstrating a greater willingness to intervene in order to promote transparency, enhance accountability, and ensure a company’s alignment with values and long-term strategic objectives. This also indicates the growing expectation for boards to proactively engage with shareholders, not just respond to concerns, and ensure that their governance frameworks and disclosure practices are robust, transparent, consistent, and aligned with shareholder expectations.

To stay ahead of the curve and avoid shareholder disquiet, companies should support a healthy and sustained dialogue with shareholders, and improve their awareness of shareholder concerns. For board advice on the topic, or help with structuring your company to manage or respond to shareholder activism, please get in touch with the authors of this article, or your usual Dentons contact.

This article was written by Sarah Gibbs, Senior Associate, and Jacca Chang, Solicitor from our Corporate and Commercial team.