In the wake of large corporate disasters in the US and Europe over the
past few years, shareholder activism is gaining momentum. In the
aftermath of the financial crisis, governments, regulators, investors and
other market participants have all yelled for greater shareholder intimacy with
the corporate boards and management teams. Additionally, there has been
an increase in shareholder activism across the globe. In order to lessen the
intensity and occurrence of similar financial crisis, it is imperative that
shareholders take more active posture with the corporate boards in which they invest.
Management treated shareholder activism as a minor botheration in
the past, but today active shareholders are increasingly playing a vital role in
the push for corporate governance reform. In most parts of the world, including
the US and Europe, institutional investors hold a sizable percentage
of shareholding in listed entities. They have become more vocal on
governance issues in these countries in the wake
of financial crisis. Historically, religious institutional investors have been
playing a leading role of shareholder activism. But in the recent past, Socially
Responsible Investment (SRI) community, pension funds, environmental
organizations and organized labor are also dominating to find unique
ways and means of reforming corporate governance practices. Gone are the
days when shareholders were happy with the board that is influenced by
management. They no longer blindly accept the conventional knowledge as to the
roles and responsibilities of owners, directors and CEOs. They would exert
their immense power in a suitably shareholder-value-maximizing way and
the interests of all shareholders were adequately protected. Experience
reveals that companies with active shareholders are more likely to be successful
in delivering enhanced shareholder's value in the long-term.
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