Emerging Markets Specialist Mark Mobius speaks out about shareholder activist responsibilities

Date: Friday, May 28, 2010
Author: Hedgetracker.com

Dr. Mark Mobius recently addressed what he terms the “right and responsibility” of shareholder activism . Dr. Mobius, who is executive chairman and top portfolio manager of Templeton Asset Management, opened his discussion on a shareholder’s rights and responsibilities by stating, “when we invest in a company, we own part of that company and we are partly responsible for how that company progresses.” As a result, he explains, “if we believe there is something going wrong with the company, then we, as shareholders, must become active and vocal.”

Dr. Mobius acknowledges that while most shareholders with only a minority stake are usually inactive and disinclined to spend their time and energy on the management of a company, he believes it is their responsibility to do so. “We may be minority shareholders, but by speaking out for what we think is right, we may be able to bring about change for the greater good of a company and all its shareholders,” he writes. Dr. Mobius illustrates his argument with an example of shareholder activism in May of 2006, when a large international manufacturing company changed the fixed royalty fee to a percentage of net sales. After sending letters of complaint and disagreement, the minority shareholders reached out to the media. “We normally do not favor public announcements on such matters, and our decision to go public was made when we felt that we had exhausted all other options available to us at the time with little success,” Dr. Mobius is careful to note. However, he argues that “it was necessary to communicate our concern and the concern of other shareholders as quickly as possible on such a material change involving a public company.”

The efforts of these minority shareholders were not in vain, and the company reconsidered its decision to change the fee structure that same month. The overall outcome was positive for the company as well, as Dr. Mobius notes that “their actions reaffirmed our faith in the company as well as our positive outlook for its future growth.”

Emerging Markets focused Templeton Asset Management is a subsidiary of mutual fund manager Templeton Fund Management. Dr. Mobius manages emerging markets portfolios and directs the Templeton research team. He is internationally recognized for his success as an emerging market investor.