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Shareholder Activism

In: Business and Management

Submitted By epmartinez01
Words 463
Pages 2
We've seen a significant increase in shareholder activism in recent years, particularly from large institutional shareholders. One of these areas is that shareholders may now voice opinions on senior management compensation (though not a binding voice). However such activism extends much further to include proposed mergers, acquisitions or spinoffs. Provide some recent examples where shareholder activism has affected a company’s performance or actions, and discuss the consequences of this.

Ans: When we look at the history, we may observe many corporate scandals by the management of company’s inspite of shareholders approving handsome compensations for all these top management of the companies. But it may be observed that inspite doing a good work for the shareholders in terms offering better compensations; still many of the members of the top management team never think of doing justice and arrange to get better returns to each shareholder. As it is known that, shareholders approve the compensation of senior management, many in difficult times, there are proposal put off by the management for higher compensation which normally not accepted the shareholders. So they do not approve it. Even though there are difficulties in approving the compensation, the management tries kind of taking revenge and sending and ensures that, the company is stepping to a merger or acquisitions or spinoffs or share price goes down drastically by reducing the market value. It is observed in case of a company namely Barrick Gold Corporation, in Canada mentioning that rejection of $47 Million compensation by the shareholders, brought down the share price of the company to a price which the lowest in the last twenty years. In this case, the denial of approval was majorly done by the institutional shareholders. As a consequence of this, the company had very difficult time in terms of operational performance. Now viewing the difficulty levels of getting approval from shareholders for certain kind of decision, company like Dell preferred to go Private. So my views in this regard would be , the compensation committee presenting the compensation for the senior management should be legitimate and it also should be ensured, the compensation presented for approval are subject to the financial position of the company and profitability.

References
Davis, P., Yehia, R., & Tombs, A. (n.d.). Executive Compensation: Do Shareholders Have a Voice? Retrieved September 9, 2014, from http://www.lexpert.ca/USGuide-Litigation/featured-articles/executive-compensation-do-shareholders-have-a-voice-9/
Dell Goes Private: 8 Things To Expect. (n.d.). Retrieved September 9, 2014, from http://www.informationweek.com/desktop/dell-goes-private-8-things-to-expect/d/d-id/1112158?
Cuña, V., & Gine, M. (n.d.). Say Pays! Shareholder Voice and Firm Performance. Retrieved September 9, 2014, from http://research.upjohn.org/cgi/viewcontent.cgi?article=1014&context=up_policypapers…...

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