Modulo are holding constant the concept of fiduciary duty,
which we've discussed before.
Shareholder activism might be defined as using an equity stake in a publicly traded
company or a privately held company to influence it's actions.
Nonfinancial shareholder activism, using minority equity stakes in publicly traded
companies to bring about social change.
In most cases, shareholder activists and
sometimes other non-shareholder activists seek to impose costs or
direct control or direct expressions on target companies
greater than the perceived cost of agreeing to demands of those shareholders.
Theoretically, a rational management might submit to those owners
who are in the minority.
And if on a particular issue they can gain a majority vote, managers might be
forced to acquiesce to their wishes even if they find them anathema themselves.
Advisory firms, important actors in the span of modern economies, are often
retained by institutional investors to suggest how and whether to vote shares.
Two firms, Institutional Shareholder Services otherwise known as ISS, and
Glass Lewis together dominate more than 90% of the market share for
institutional investor vote consulting.
ISS and
Glass Lewis recommendation significantly influence shareholder voting.
Following the 2009 regulation changes we've seen in the US,
especially Dodd-Frank, brought with them enhancements of shareholder power.
Dodd-Frank Section 951 specifically mandated periodic say on pay votes,
allowing shareholders to have greater say on corporate manager compensation.
And 971 allows the SEC to making rules forcing companies to list shareholders'
director nominees on proxy ballots.
The SEC did make a rule, but a Federal Court threw it out in 2011.
The activism of big asset managers is critical here, and of owners.
The shareholder activism I've seen is, in fact, changing dramatically
as the world's largest asset managers begin to use their power.
Meanwhile, Congress in the US is attempting to restrict shareholders'
ability to force resolutions of issues through what are called proxy votes,
votes that you might cast when you don't go to the annual meeting, or
a special meeting called by companies whose shares you own, and
whose votes you have access to.
Until recently, shareholder activism was the province of certain gadflies,
often with non-social economic motivations,
the small niche SRI fund managers in progressive foundations.