July 2021


Pro Governance

Promoting Good Corporate Governance









Bondholder Protection


Merger Regulation


Private Equity

Shareholder Activism

Shareholder Voting

Wider Share Ownership






Shareholder  Activism

It is an accepted dogma at most business schools - and certainly with investment bankers - that corporate activists are a good thing.

But there is a basic problem in seeing the practice of shareholder activism as a solution to the problem of corporate governance: Any communication among investors creates the danger of conflict of interests. Dialogue with management or other investors gives an investor insights into the business outlook of the business and an advantage vis--vis ordinary shareholders that are not privy to this information.

Only full disclosure of all communications between management of investors can guarantee a level-playing field for all investors. In addition, a 'quiet period' after any direct communication might also be useful. A few days after any direct contact (and dissemination of relevant minutes of the information exchanged) should be enough given that most investors have easy access to bulletin boards, corporate websites and newswires.

It would also be helpful if all significant proposals are discussed in an open forum that is open to all shareholders and where all proposals are put forward. It is high time that the owners of a business do not only read in the newspaper when major decisions affecting their investment are taken. The good old Annual General Meeting (possibly supplanted by some sort of electronic alternative) would be the most appropriate forum.




About Pro Governance

Our Mission is to campaign for the protection of investors and savers by promoting good corporate governance.

We also believe that the wider spread of share ownership is in itself a public good and may sometimes even be preferable to higher economic efficiency.

Shareholders in publicly listed companies are widely dispersed and cannot micro-manage the affairs of the companies they are invested in. The international nature of today's shareholder registers make this also impossible for large institutional investors.

On the other hand, abuses that have developed over the past few years make it imperative that company managements are supervised in a more efficient way.

Tax incentives and institutional constraints have favoured the growth of large institutional investors at the expense of small individual shareholders. This makes it more important than ever that these investors behave like fiduciaries and have the interests of their clients at heart.

This means that the business of money management cannot be treated like any other profit-maximising business. Like the medical, legal or academic professions the interest of the clients has to have priority when critical decisions have to be made with regard to companies the money managers are invested in.

We at Pro-Gov think that the establishment of an effective international forum combining representatives from the national organisations of individual shareholders and investors will be an effective step in the direction of improving corporate governance.

At the moment the corporate Governance discussion is limited to academics, journalists in the quality business press, institutional shareholders and companies and their business associations as well as politicians. The one party missing on the table are the real investors who - with some exceptions - voiceless in the debate.

"The scandal isn't what's illegal; it's what's legal"
(Michael Kinsley)






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