NIRI 2015

Activism – More than a Passing PhaseSponsored Session

A Buy-side/Corporate Perspective

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“What you don’t see can sink you”

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Activism – More than a Passing Phase

Company overview

Founded in 1991 – Art Rivel invented the IR Perception Study (circa 1972)

Focused exclusively on investment community research

We work with half of the S&P 100

Over 150 custom perception studies conducted each year

Intelligence Council – broader investment community research

Over 6,000 investment community interviews conducted each year

Over 4,000 IRO interviews conducted each year

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Activism – More than a Passing Phase

A comprehensive North American review

IRO studies in April 2014 and May 2015

Buy-side studies in March 2014 and May 2015

CEO/CFO study in December 2014

Objectives

Identify gaps between companies and the buy-side

Monitor key trends

What do IROs need to do? What does top management need to know?

Prepare for the unexpected – identify issues before they surface

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Expectations and Trends

Near-Term Expectations for Shareholder Activism (May 2015)

GLOBAL BUY-SIDE

68% BELIEVE ACTIVISM WILL INCREASE OVER NEXT

COUPLE YEARS

3% 9%4% 1%2%

32%19%

26%

64%78%

63%

North America(181)

Europe(110)

Asia-Pacific(63)

Increase

Little Change

Decrease

Uncertain

BY REGION

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Expectations and Trends

Sectors Expected to See the Most Activism (over Next Year or Two, May 2015) (Among Global Buy-side, n= 354)

20%

24%

30%

31%

34%

41%

43%

46%

55%

Utilities

Telecommunications

Materials

Healthcare

Financials

Consumer

Industrials

Technology

Energy

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Expectations and Trends

Inroads: Among North American Buy-side (May 2015):

51%12%

Have been contacted by an activist in the past year

Have proactively contacted an activist to voice displeasure about a stock they own

43% Report that an activist has successfully recruited their support at one time on a stock they owned (among those who have been contacted by an activist)

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February 2010 March 2014 February 2015

GLOBAL BUY-SIDE

71% BELIEVE SHAREHOLDER ACTIVISM

IS POSITIVE FORCE IN EQUITY MARKETS

Huge increase in receptivity to activism, a few second thoughts recently

Expectations and Trends

GLOBAL BUY-SIDE

84% BELIEVE SHAREHOLDER ACTIVISM

IS POSITIVE FORCE IN EQUITY MARKETS

US BUY-SIDE

43% BELIEVE SHAREHOLDER ACTIVISM

TYPICALLY IMPROVES ACOMPANY’S INVESTMENT APPEAL

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Why Do Investors Support Activists?

39%

20%

13%

8%

8%

5%

5%

Prompts mgmt accountability/a wake up call

Improves capital mgmt/shareholder value

Refocuses mgmt on strategy/business

Prompts Board accountability

Brings attention to issues

Better aligns board/mgmt with shareholders

Improved transparency

Most Important Positives of Shareholder Activism*(North American Buy-side, March 2014, n=181)

* Multiple responses accepted

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Why Do Investors Support Activists?

5%

7%

20%

38%

44%

High trading volume/volatility

Bad management in general

Excess cash on balance sheet

Stagnant stock/chronic undervaluation

Poor financial performance/missing targets

Telltale Signs of Being Vulnerable to an Activist (Top 5) (Unaided) (North American Buy-Side, March 2014, n=181)

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The Great Divide

Are Companies Complacent?

38% of 181 North American buy-siders believe CEOs underestimate the threat

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The Great Divide

Are Companies Complacent?

69% of 156 North American CEOs/CFOs said they were “not too concerned” with activism (December 2014)

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The Great Divide

April 2014 May 2015

1%2%2%

45%49%62%

33%33%

26%22%16%10%

Self-Reported Level ofIRO Concern

Perceived Level ofManagement Concern

Perceived Level ofManagement Concern

Very concerned

Somewhat concerned

Not too concerned

Uncertain/refused

Level of Concern with Activism: The IRO View (2014 to 2015)(Among North American IROs)

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How Companies Are Responding

34%

49%

11%6%

Well prepared

Somewhat prepared

Not well prepared

Uncertain

Activism Preparedness (Among North American IROs, May 2015, n=184)

39% Large-cap33% Mid-cap26% Small-cap

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How Companies Are Responding

33%

42%

62%

74%

31%

13%

9%

11%

36%

44%

29%

16%

Receptive to proxyaccess

Open to changingstrategy appropriately

Treat with open mind

Company will engageactivist

Positive posture Uncertain Negative Posture

Overall Posture Toward Activist Investors (Aided)(Among North American IROs, May 2015, n=179)

Company will ignoreactivist

Will treat as hostile

Will defend strategystrongly

Unreceptive to proxyaccess

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Takeaways

Institutional investors believe activists drive valuation

Institutional investors are willing to work with activists

Many do not believe companies are well prepared

Most CEOs and CFOs are not concerned

Most companies do not have a plan

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Activism – More than a Passing Phase

What you don’t see can sink you …

If you have any further questions, please email Brian at brivel@rivel.com