Mike Cannon-Brookes is a young Australian billionaire. At the end of May, he managed to bring down his country’s most polluting company – AGL Energy, Australia’s leading electricity producer – by defeating its split plan. The company is supposed to keep its coal-fired plants running until 2045, but Mr Cannon-Brookes expects to bwell anticipate their closure. Foray into this form of shareholder activism.
Australia, where the sun shines in abundance, is home to fertile ground for solar energy. But this island country in Oceania is above all the kingdom of a less brilliant energy, coal. Australia even holds the prize for the country producing the most greenhouse gas emissions per capita from coal, according to a report by British think tank Ember.
For Mike Cannon-Brookes, Australia’s fourth fortune (US$10.6 billion), but also a techno magnate converted into a climate activist, the country must get out of this dependence and turn to renewable energies. He is what is called an “activist shareholder” — a category of activists who use their stake in the capital of a company to influence its activities.
In February, the billionaire attempted to buy AGL along with Canadian asset management firm Brookfield Asset Management to force the company to align its business with the goals of the Paris Agreement. But the takeover attempt failed.
Mr. Cannon-Brookes then purchased more than 11% of AGL’s shares, becoming the company’s largest shareholder. And after a campaign to other shareholders to oppose the company’s plan to separate its electricity retail operations from those of its generating units, Mr. Cannon-Brookes finally got his way. .
On Monday, May 30, AGL said it would not go ahead with its split plan, admitting it was unlikely to get enough shareholder votes to get the deal approved. The CEO of the company has submitted his resignation.
In a statement, AGL then said it would undertake a review of its strategic direction with a focus on potential decarbonization initiatives and discuss further with Grok Ventures, Mr. Cannon-Brookes’ investment firm, to find a way forward. “A great victory for environmental activists”, according to the Wall Street Journal.
The climate in terms of shareholder demands
The case of AGL is far from isolated. And shareholder activism “is not a new phenomenon”, recalls Ivan Tchotourian, professor at Laval University specializing in governance and corporate social responsibility.
“The means of action are varied. It often starts with dialogue. If that doesn’t work, activists can make their demands public through the press. They can submit resolutions in assembly. But they can also exert pressure by disinvesting, for example, this is what the Fund is doing when it says it is turning its back on oil”, explains Mr. Tchotourian.
Activists do not all pursue the same objectives either, he specifies. Some are motivated by environmental and social objectives, but others — think of hedge funds (hedge funds) — have purely pecuniary objectives.
Nevertheless, activism in connection with environmental, social and governance (ESG) criteria is popular, as evidenced by the season of annual meetings which is drawing to a close. This period, which runs from April to mid-June, is an important one for companies and their shareholders, who find it an opportunity to make their voices heard.
This year, shareholders of US public companies filed a record 529 resolutions related to ESG criteria, according to February data contained in the report published by As You Sow and Sustainable Investments Institute. This number represents an increase of approximately 20% over last year. Of these motions for resolutions, 145 were directly related to issues of the environment and climate change, an increase of nearly 60% over the previous year.
Activist approaches do not always work. Just think of the recent case of Carl Icahn, known for inspiring Gordon Gecko in the movie Wall Street, which has just suffered a failure against McDonald’s. The American multi-billionaire criticized the company for not having kept its promise, made in 2012, to require its suppliers to gradually stop using gestation cages that are too small for sows. But shareholders have not acted on the animal welfare concerns raised by the businessman.
However, sometimes these types of campaigns work. For example, in mid-May, Home Depot shareholders voted to approve proposals calling for an independent audit report on possible racial discrimination within the company as well as a report on its links to deforestation due to to its wood supply. Sometimes these campaigns even cause a stir.
Like in June 2021, when the militant company Engine No. 1 took on Exxon and won the oil giant the election of three new board members.
Not to everyone’s taste
Of course, this type of action also has its share of detractors.
Especially on the side of the conservatives, who see it as an obstacle to business performance. Former US Vice President Mike Pence has recently criticized investor-activist campaigns aimed at forcing companies such as Exxon Mobil Corp. to follow principles of socially responsible investing, claiming that they elevate the goals of the left above the interests of corporations and their employees.
But there are also the “disillusioned”, those who do not believe that change can take place from within companies, raises Ivan Tchotourian. “There are obviously fatalistic people, who no longer believe in it, because of the greenwashing exercised by many companies. But I think that does not put an end to the movement, because there are people who continue to believe in it, ”he believes.