Lesson 4 of 7 · All lessons in this module
- Principal-agent relationships and agency costsVideo lesson
- Managers versus shareholders: five ways interests diverge
- Controlling versus minority shareholders, and shareholders versus creditors
- Reporting, shareholder meetings, activism and takeovers
- Creditor protections and board committees
- Employees, customers, suppliers and governments
- Risks of weak governance and benefits of strong governance
Lesson 4 of 7 · 14 min
Reporting, shareholder meetings, activism and takeovers
Shareholders protect themselves through information (corporate reporting), voice (general meetings and proxy votes), pressure (activism and lawsuits) and the threat of a change in control, which anti-takeover defences can blunt.
In short
- Corporate reporting and transparency are the foundation of governance; public companies publish audited annual statements, while private companies negotiate what they disclose to investors.
- Bondholders rely on a trustee to monitor bond terms and handle payments.
- The AGM votes on routine items (board elections, auditor, accounts, pay, say on pay); an EGM handles special items (bylaw changes, mergers, capital increases, liquidation) or is called by enough shareholders.
- Proxy voting is the most common way investors take part in general meetings.
- Shareholder activism (often by hedge funds) aims mainly to raise value quickly; tactics include proxy fights, resolutions, publicity and derivative lawsuits.
- Takeover threats (proxy contest, tender offer, hostile takeover) discipline managers; staggered boards and poison pills weaken that discipline.
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