Moody’s: US rule changes will boost activist investors

Moody's: US rule changes will boost activist investors

Credit ratings experts believe Stateside corporate governance reforms will leave companies open to greater pressure from activist investors

Moody’s has warned that corporate governance amendments will allow activist
investors an even tighter stranglehold on quoted companies.

‘The expansion of rights for equity investors in US public companies carries
the potential of substantial risk for bondholders,’ said Mark Watson head of the
credit agency’s
corporate
governance
team.

The group believes that reforms on issues such as majority voting of
directors and investors nominations of their own candidates to the board could
benefit bondholders, but it says they would also give investors with a much
shorter-term view more sway.

Activists can apply pressure on companies to sell subsidiaries or return cash
to shareholders, and can even mount ‘proxy fights’ whereby threats are made to
oust management and their own candidates are appointed to the board if their
demands are not met.

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