STRIKING THE RIGHT BALANCE ON SHAREHOLDER ACTIVISM

Introducing additional shareholder votes is not necessarily the answer

- PARMI NATESAN

THE LONG list of corporate misdemeanours seems to keep on growing, and one can be forgiven for thinking that drastic action is the only way to get corporate governance back on track.

In that context, there are growing calls for shareholders to have a greater say via mandatory voting on certain issues at the annual general meeting (AGM).

The draft companies Amendment Bill, published for comment last year, proposed some additional powers for shareholders. These included binding votes on the company’s remuneration policy and remuneration implementation report, as well as a shareholder vote on the social and ethics committee report.

So far, so good … probably—but there is a danger that this approach could be taken too far. The issue is that it runs the risk of compromising the corporate governance framework itself by getting in the way of the board’s ability to fulfil its duties.

In the end, excessive shareholder interference via targeted voting at AGMs could actually end up working against the company’s best interests. After all, as the IoDSA has repeatedly pointed out, it is the meddling by the state as shareholder in matters that should be the responsibility of the board that lies behind the disastrous performance of many of our state-owned enterprises.

Revisiting the governance structure