What are the primary sources of laws and regulations relating to shareholder activism and engagement? Who makes and enforces them?
The primary sources of laws and regulations relating to shareholder activism are the Code of Obligations (CO) governing the rights and obligations of companies' boards of directors and shareholders in general and the Financial Market Infrastructure Act (FMIA), enacted on 1 January 2016, containing additional rules for listed companies and their shareholders. The provisions of the FMIA are set out in more detail in two ordinances, the Financial Market Infrastructure Ordinance (FMIO) and the Financial Market Infrastructure Ordinance by the Financial Market Supervisory Authority (FMIO-FINMA). Further, the Ordinance against Excessive Compensation in Listed Companies (OAEC) contains specific rules on the compensation of management and the board of directors. The Takeover Ordinance (TOO) sets out detailed rules on public takeover offers, including boards' and qualified shareholders' obligations.
Companies listed on the SIX Swiss Exchange are also bound by, inter alia, the Listing Rules (LR-SIX), the Directive on Ad hoc Publicity (DAH) and the Directive on Information relating to Corporate Governance (DCG).
The CO and the FMIA are enacted by Parliament, the FMIO and the OAEC by the Federal Council, the FMIO-FINMA by the Financial Market Supervisory Authority FINMA (FINMA), the TOO by the Takeover Board, and the LR-SIX and the DAH by SIX Exchange Regulation.
Compliance with the CO and the OAEC is primarily enforced by the civil courts. FINMA enforces the FMIA as well as its ordinances, and the Takeover Board enforces the TOO and the takeover-related provisions of FMIO-FINMA. Compliance with the LR-SIX, the DAH and the DCG is enforced by the SIX Exchange Regulation.
How frequent are activist campaigns in your jurisdiction and what are the chances of success?
Compared with other jurisdictions, in particular the United States, the number of activist campaigns involving Swiss companies is still moderate. However, Switzerland is a key European target for activist shareholders. With six campaigns on targets with a market capitalisation of more than US$500 million in 2019, Switzerland ranked fourth in Europe after the United Kingdom, France and Germany.
Since 2012, actions in Switzerland have more than doubled. The chances of success depend on the content of the campaigns and cannot easily be measured among others because targets may announce changes in operations or strategic adjustments as their own (pre-existing) plans that happen to coincide with the requests of the activist shareholder. Proxy fights at shareholders' meetings are rarely successful, but occasionally activists win them (eg, Veraison at Comet's 2019 proxy fight for chair election). The chances of success are higher if proxy advisers such as the Institutional Shareholder Services and Glass Lewis issue voting recommendations in support of the activist's requests.
How is shareholder activism generally viewed in your jurisdiction by the legislature, regulators, institutional and retail shareholders and the general public? Are some industries more or less prone to shareholder activism? Why?
The corporate community is generally critical of shareholder activism because of its rather short-term orientation. The legislator and regulators have not expressed a position on shareholder activism but tend to lower the hurdles of shareholder minority rights. Retail shareholders and the general public will form an opinion on a case-by-case basis. Institutional shareholders will analyse the requests of the activists and decide whether to support them. Only in rare instances, will they vote with the activist.
It seems that basic materials, technology and services are regularly targeted industries; the financial industry, industrial goods and the healthcare sector have also attracted interest from activists. Owing to a variety of reasons that have attracted activist shareholders in the basic materials industry, it should not be concluded that this industry is particularly prone to activist campaigns. Also, there are no regulatory reasons that facilitate shareholder activism in certain industries over others.
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Originally published Apr 30, 2020.
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