CORPORATE GOVERNANCE CORPORATE GOVERNANCE AND SHAREHOLDER ACTIVISM

Objectives
Shareholder activism and its influence on corporate governance, To clearly role, to understand think in make they why a

Shareholders leadership companies

have

encouraging necessary

environmental, social and economic, and governance contribution

Cont
The rights of shareholders and their equitable treatment, The importance of corporate

governance to share holders, Pros activism Etc etc and cons of shareholder

Introduction
Organisations are made up of Boards of Directors Stakeholders, and Management And are govern by some rules and regulations which they have with.

Stakeholders are groups of individuals who are related to the company either Directly, or Indirectly

Various stakeholder groups

GOVERNMEN T SHAREHOLD ERS EMPLOYEES INTEREST GROUPS COMPANY LOCAL COMMINITIES PROVIDERS OF CREDIT

CUSTOMERS

SUPPLIERS

Shareholder
A stakeholder group Whose Rights are enshrined in law Lehrich (2011) defined Shareholder as owner of a corporation.

Cont
A shareholder is an individual, institution, firm or other entity that owns shares in a company (ICAG, 2010). They are the people who invest their money to provide risk capital for a

Rights of a Shareholder
Entitled to benefits from profits (Dividend) Be part of decision making process (AGM) To question or resist any decision made or being made by management, eg. Mr. Ofori and GCB

Cont
Investment is secured from impersonation or any type of fraud. Access to information Use shares as collaterals for accessing credit

Corporate Governance
Involves a set of relationships between a companys management, its board, its shareholders and other stakeholders (OECD, 2004)

Cont
The way a corporation protects the interests of its shareholders and other financiers (Kokemuller, 2012).

Barons Accounting Dictionary

The system of checks and balances designed to ensure that corporate managers are just as vigilant on behalf of long-term shareholder value as they would be if it was their own money at risk

Our definition
a system by which companies plan, organize, direct and control resources effectively and efficiently, to increase profit with strong emphasis on stakeholders welfare and adherence to the regulatory framework governing the organisation.

Principles of Corporate Governance

Rights to participate in, and be sufficiently informed on decisions, Should be informed of rules that govern general meetings Disclosure of Capital structures and

arrangements to shareholders

Cont
Rules and procedures should be

clearly articulated for shareholders to understand Same equitable treatment to every shareholder Costs and benefits of exercising

Can shareholders solve corporate governance problem

Bebchuk (2005), in her research The Case for Increasing Share Power, concluded that it could.

What is Shareholder Activism?

The voting exercise rights, of ownership writing to using the

company, talking to directors etc Use of Equity stake to put pressure on management or exert influence over business management.

Cont
Looking standards BUT not seeking to instigate to improve corporate

conflict between the company and its owners

 Shareholders who exhibit such characteristics are referred to as Activist Shareholders. Thy usually have large shares in the company They attempt to gain control and

Components of Activism
voting with ones feet (exit), private discussion with or public corporate

communication

boards and management, press campaigns, blogging and other e-ways of public

Cont
openly talking to other shareholders, putting resolutions, calling shareholder meetings and, ultimately, individual seeking directors or to the replace entire forward shareholder

Forms of Shareholder Activism

Proxy Battles Publicity campaigns, Shareholders resolutions, litigation, and negotiations with management

Reasons for Shareholder Activism

To protect investments - a tool to reduce risk It can enhance returns - Shareholder activism may boost returns. Investor responsibility is taken seriously Its their money

The Company and Corporate Governance

Shareholder activism can force

better corporate governance. Shareholder stronger activism and creates better

companies

returns for investors.

Pros and Cons of Shareholder Activism

Pros Hold managements feet to the ground New Ideas Management may bend

Cont...
Cons Issue with selling Shareholders can sometimes be wrong Different investment Horizon

Conclusion

THANK YOU