Shareholder Activism

Annual

 Mee)ngs:

 Shareholder

 Vo)ng

Review

 of

 Ar,cle

Shareholder

 Ac,vism

 through

 Proxy

 Proposals:

  The

 European

 Perspec,ve

Lisa

 Baudot

  4

 May

 2010

Introduc,on

•  Responses

 to

 corporate

 governance

 concerns

 :

–  Con,nuum

 of

 responses

 that

 dissa,sfied

 investors

 give

Vote

 with

  Your

 Feet

  Shareholder

  Ac)vism

Investors

 hold

  shares

 and

 seek

  internal

 change

Market

 for

  Corp

 Control

Investors

 ini)ate

  takeovers

 / buyouts

Formal

  Enforcement

Investors

 bring

  lawsuits,

  li)ga)on

– 

  –  Private

 :

 informal

 versus

 formal

 mechanisms

  –  Public

 mechanisms

 ini,ated

 by

 public

 bodies

Investors

 sell

  shares

•  Shareholder

 ac,vism

 :

–  Behind

 the

 scenes

 nego,a,on

 with

 management

  –  Submission

 of

 proposals

 for

 shareholder

 vote

Lisa

 Baudot,

 13

 April

 2010

Theory

•  Key

 perspec,ves

 regarding

 shareholder

 –ini,ated

 proposals

  •  Efficient

 monitor

 hypothesis

 (supported

 by

 US

 literature)

–  Effec,ve

 means

 of

 mi,ga,ng

 agency

 concerns

  –  Only

 large

 (ins,tu,onal)

 shareholders

 have

 the

 means

 /

 incen,ve

 to

  undertake

 monitoring

 and

 control

 ac,vi,es

 (Grossman

 &

 Hart,

 1980;

 Shleifer

 &

  Vishny,

 1986)

•  Incen,ve

 conflict

 hypothesis

–  Used

 by

 ac,vists

 to

 pursue

 their

 self-­‐serving

 agendas

 as

 opposed

 to

  shareholder...