Ability Of Shareholders Research Articles

Hashtag capitalism: An introduction

This article aims to introduce the phenomenon of ‘hashtag capitalism’ – that is, the ability of shareholders, employees, customers and even members of society to leverage social media in a way that influences corporate behaviour. While it is a positive development that, via social media, members of society are engaging with and influencing corporate decision-making, there are also concerns that some individuals are able to influence the financial decisions and opinions of others, and that such individuals might need to be held accountable. The article describes the different developments that have created the perfect storm to give rise to hashtag capitalism and argues that there is an urgent need for corporate law and regulation to reckon with this phenomenon, to ensure that we are able to retain the benefits while effectively addressing the risks involved.

The Appraisal Right in terms of Section 164 of the Companies Act 71 of 2008: An Overview

The appraisal right in terms of section 164 of the Companies Act 71 of 2008 has been applicable to fundamental transactions undertaken by companies for a number of years. The first two aims of this article are first to provide an overview of the appraisal right, and second to revisit certain concerns that were raised about the determination of fair value by the courts where a shareholder makes an application to court for a determination of fair value. It is suggested that this should not present a major problem in practice, considering that existing practice in takeover laws requires the valuation of shares by an independent expert when a company undertakes an affected transaction. In the main, the requirements for fundamental transactions overlap with those for affected transactions. The requirements for affected transactions adequately deal with the determination of fair value. The third aim is to provide an overview of how companies attempt to limit the effect of the appraisal right on fundamental transactions using various terms and conditions precedents, and the fourth is to discuss developments in case law on the appraisal right remedy. It is concluded that the decisions of the courts on its application will assist companies in structuring fundamental transactions and shareholders in exercising the appraisal right. Finally, the article suggests reasons for including certain subsections in the appraisal right remedy, for instance, the power of the courts to award costs in certain respects and a requirement that extends the time periods within which a shareholder may make a demand where the company fails to comply with specific requirements. It is suggested that this enhances the ability of shareholders to exercise the appraisal right. The article also provides concluding remarks advising companies and shareholders. In the case of companies, it concludes, for instance, that due diligence in identifying the risk that certain shareholders may raise appraisal rights is required before initiating a transaction that may be subject to appraisal rights. Failure to do so may be costly to the company. And, in the case of shareholders, failure to adhere to the required procedures may result in loss of their appraisal right remedy, or loss of the right to approach the courts for an appropriate relief under the appraisal right remedy.

Exemption of a joint stock company from the obligation to provide information to a shareholder.

The subject of research. Issues concerning the exercise of the right of shareholders to receive information are analyzed. The focus is on the issues of exemption of a joint-stock company from providing information. The development of the institute of the information provision to shareholders by joint stock companies are consistently analyzed. The main trends in the development of this institute are shown: gradually narrowing the ability of shareholders to exercise their right to receive information through such means as restriction, differentiation and exemption from providing information. Special emphasis is placed on the institute of exemption from providing information. The purpose of the article is to show the main drawbacks of the existing model of exemption of a joint-stock company from the obligation to provide information to shareholders and to formulate directions for the development of legislation. The author's main scientific hypothesis can be summarized as follows. The Federal law «On joint-stock companies» contained an initial defect in the description of information exchange between a shareholder and a joint-stock company. The shareholder's right to information was not described, in fact, it was «embedded» in the obligation of the joint-stock company to provide information. The subsequent changes to the law resulted in a narrowing of the rights of the shareholder, practically depriving the minority shareholder of the right to information. This defect has led to significant legal uncertainty when the joint-stock company exercises its right to be exempt from providing information. This uncertainty should be eliminated, because the regulatory goals for granting joint-stock companies an exemption from the obligation to provide information to shareholders (article 92.2 of the Federal law «On joint-stock companies» that counters sanctions pressure) are absolutely correct. At the same time, some of the grounds for exemption from the obligation to provide information to shareholders (article 92.1 of the Federal law «On joint-stock companies») must either be excluded or reformulated. The author notes the complete «break» between the current regulation and the ideas about information exchange between a shareholder and a joint-stock company, that initially inspired the creation of the law on joint-stock companies. The inclusion of sanctions in the law on joint - stock companies as a factor affecting the performance by a joint-stock company of its obligation to provide information to shareholders should be fully welcomed. However, the legal and technical design of the corresponding political and legal idea cannot be considered optimal. In this part, the legislation requires a complete renovation based on the principle of balancing constitutional values and the interests of the state, majority and minority shareholders. Description of research methodology. The research is based on a systematic analysis, as well as the interpretation of Russian legislation and doctrine. Information about the main scientific results. The development of legislation on joint-stock companies in terms of providing information is shown. It is shown that if legislator taking into account sanctions when regulating the obligation of a joint-stock company to provide information, the goals of legislative regulation fully comply with constitutional principles, but specific legal decisions cannot be considered optimal. Conclusions. It is concluded that development of legislation on joint-stock companies has led to a significant restriction of the ability of shareholders to receive information. The author formulated the priority of regulatory goals in countering sanctions pressure and offered specific directions for improving legal regulation.

Towards achieving better corporate governance in Nigeria: Assessing the legal framework of shareholders’ enforcement role

The risk that directors may act in ways that are contrary to their duties is always present. One of the legal responses is to ensure that shareholders are statutorily positioned to take steps that would ensure that the opportunistic behaviours by the directors are met with punitive consequences. In spite of this, corporate failures or near corporate failures in Nigeria are recurring decimals in Nigeria’s corporate equation. It is on this premise that the ability of shareholders to take enforcement steps is reviewed. The paper reviews relevant statutory provisions and whether there are inherent gaps that impact shareholders’ position.

Schrodinger's Corporation: The Paradox of Religious Sincerity in Heterogeneous Corporations

Consider a corporation where one group of shareholders holds sincere religious beliefs and another group of shareholders does not share those beliefs but, for a price, will allow the religious shareholders to request a religious exemption to a neutrally applicable law on behalf of the corporation. The corporation is potentially both religiously sincere and insincere at the same time. A claim by the corporation for a religious accommodation requires the court to solve the paradox created by this duality and declare the corporation, as a whole, either sincere or insincere in its beliefs. While the Supreme Court and scholars have noted some of the particular issues raised when determining the religious sincerity of shareholders’ claims, to date no one has engaged systematically with the question of whose religious sincerity should be attributed to the corporation when shareholders hold heterogeneous, or diverse, religious beliefs. This Article provides a framework for determining the sincerity of corporations with religiously heterogeneous shareholders. I propose an attribution inquiry that engages in a meaningful dialog between state corporate law and theories of religious sincerity. What little attention attribution has received tends to suggest that state law regarding corporate control provides an easy corollary. It does not. Corporate law is designed to enable contracting in pursuit of economic efficiency. Allowing control to stand in for attribution would lead to the monetization of religious sincerity, harming third parties and diminishing the value of religious liberty both in the courts and the public eye. This Article considers alternative ways in which principles of state corporate law can shape the attribution inquiry to better delimit exemptions while still protecting the value of religious liberty. Ultimately it concludes that meaningful restrictions should be placed on the ability of shareholders with heterogeneous religious beliefs to contract among themselves for corporate religious sincerity.

Experience of Internationalization of Chinese Corporate Law and Corporate Governance: How to Make the Hybrid of Civil Law and Common Law Work?

This paper focusses on the Chinese approach to corporate governance. It begins with a survey of the historical foundations of the modern corporate law of China. The unique relationship which arose between Chinese markets and foreign suppliers from the consular judiciary power enjoyed by many nations in the early twentieth century and its impact on the development of Chinese corporate law is considered first. A specific focus is the circumstances surrounding the drafting of the first Chinese Corporate Law of 1904, enacted with the goal of making China a strong commercial power. The hybrid nature of the first Chinese corporate law, being drawn from Japanese and English structures, and its impact on modern legislative approaches to corporate law form the basis of the discussion of the relationship between the facets of the modern corporation in China. The position of shareholders as the corporate power centre, their relationship with the boards of directors and supervisors, and the powers of each are noted. Another core focus is the method of enforcement of the corporate law in China. The proper plaintiff, defendant and the possibility of derivative actions under the Corporate Law of 2013 are discussed, with a particular focus on the ability of shareholders to bring actions to protect the interests of the corporation. These powers must be exercised so as to guard against possible abuses of restrictions on action by wrongdoing supervisors and directors acting in collusion. The article concludes with an analysis of the role of the Chinese Securities Regulatory Commission (CSRC) in improving corporate governance. Significantly, it is noted, that the possibility of class actions in China can be used to hold corporations, controlling shareholders, and management accountable for exercises of power which are against the public interest.

Corporate Regulation, Climate Change and Corporate Law: Challenges and Balance in an International and Global World

The focus of this paper is the impact of corporate governance on the way in which corporations handle their environmental obligations. It is noted that the current relationship between corporations and the environment is unsatisfactory, drawing on levels of climate pollution and disasters such as the Tafigura to demonstrate the fact. Possible methods through which corporate governance can be used to address environmental issues are explored. The neo-liberal bent of current supervisor standards, in particular the World Bank's country assessment and OECD's guidelines emphasis on shareholder interests, is highlighted. It is argued that the current capitalist models fails to take adequate account of environmental concerns. The paper compares of UK and Albanian approaches to the regulations of directors' duties, as a reflection on the corporate governance policy of these jurisdictions. The ability of shareholders to protect and enforce corporate and environmental interests against directors who mismanage the corporation under both systems in considered. The paper concludes that the adoption by Albania of laws allowing for the lifting of corporate veils for companies acting internationally represents a significant advantage for minority stakeholders, including the environmental lobby, to ensure corporate responsibility.

Democracy and shareholder's participation

Democracy and participation of shareholders or the demand for their active participation in the meetings of the Assemblyhas increasingly gained in importance in modern conditions. This is because, negative trends of passivation, the limitations of democratic potential of shareholders and shareholders' rights abuse by the management body, especially in the work control and compensation policy of shareholders, have been observed in a detailed analysis of the application and results of the Shareholder Rights Directive. The passivity of shareholders, as one of the most striking features of their position in the joint stock company today, is the biggest problem and threat to democratic processes within the company. If we bear in mind that the most common definition of shareholder democracy is 'ability of shareholders to influence the management of the company', we can notice a clear picture of the seriousness and importance of the lack of shareholder participation. This is the reason why the author of this paper gradually examines the causes and consequences of the passivity of shareholders, the proposed changes in this context in the Law of the European Union and the practical implications of such solutions in practice. In addition, the author examines contemporary forms and conditions for shareholder democracy and the legal framework in the European Union and the Republic of Serbia. In this way, we analyze the situation in this area and point out shortcomings of certain solutions, as well as the implications they cause in practice. The main thesis from which starts the scientific work and which will be gradually proven through theoretical and practical analysis is that the wider social processes directly reflect on the state of the joint-stock companies, or the state of corporate governance. This means that the negative trends of modern democracy (in the constitutional sense) are almost mirrored in economic capital (EC) and our attempt in this paper is to prove that, through the analysis of existing solutions. On the other hand, some solutions of shareholder democracy are applicable in terms of contemporary socio-political relations and can produce a certain positive impact on the democratic processes.

How the D.C. Circuit Got It Wrong: The Decision in Business Roundtable v. SEC, SEC's Rule 14a-11 and the Proposal for Increased Shareholder Access to Corporate Proxy Materials

This article provides the first examination of the opinion of the Court of Appeals for the District of Columbia in Business Roundtable v. SEC, as it pertains to the SEC’s would-be proxy access rule, R. 14a-11. The SEC introduced a new proposal in 2009 which would allow shareholders to place their own candidates on the proxy materials prepared by a corporation for its own slate of nominees. The proposal would have the effect of reducing cost barriers to shareholders related to procuring disclosure documents, copying costs and mailing fees. Improved shareholder access to the nomination and election process would ensure increased accountability of boards to the shareholders in allowing for greater ease of removal of inept directors and their replacement with qualified candidates. Essentially, the SEC proposal sought to increase the ability of shareholders to free-ride on corporate proxy materials.Following the adoption of the proposed rule, R. 14a-11, the rule was challenged in the Court of Appeals for the District of Columbia in the case of Business Roundtable vs. SEC. The Business Roundtable Court’s convoluted analysis and misplaced criticism resulted in the voidance of R. 14a-11. In so doing, the D.C. Circuit prevented the SEC from duly exercising its rulemaking authority as an administrative agency and struck down the SEC’s attempt to provide more meaningful access to the mechanisms of corporate accountability. This article analyzes the D.C. Circuit’s holding in Business Roundtable and will demonstrate that this decision is fundamentally flawed. This article seeks to bring a new prospective to the longstanding debate regarding the appropriate level of corporate board and director accountability in the post-economic bailout era. To wit, this article postulates that without greater shareholder access to the expensive and complex proxy nomination procedures, corporate boards and directors will continue to be unresponsive to their constituent shareholders. The article also explores the overreaching of an outcome-driven D.C. Circuit which disregarded the standard of review (“arbitrary and capricious”) in attempt to quell the uproar of big business. This topic should be one of concern to all legal scholars and lay persons alike as the D.C. Circuit’s open hostility to shareholder rights threatens to impede the progress of federal and administrative economic reform.

Derivative Actions under English and German Corporate Law – Shareholder Participation between the Tension Filled Areas of Corporate Governance and Malicious Shareholder Interference

Derivative actions, i. e. the ability of shareholders to bring proceedings to enforce a cause of action vested in the company, may be considered an essential constituent of almost every corporate governance system. Derivative action litigation has been commonly used in both common law and civil law systems as a means to monitor corporate management and to protect minority shareholders' interests. However, to be effective as a minority shareholder protection device, it is key that derivative action legislation strikes the right balance to ensure that both shareholder incentives and effective safeguards are in place. Indeed, if the pendulum swings too far in any direction, derivative actions may either be a dull corporate governance sword or an open floodgate for vexatious shareholder litigation. In this article, the author undertakes to explore this balance on a comparative basis involving English and German corporate law and argues that despite obvious conceptual similarities in both jurisdictions the pendulum swings different ways.

The Impact of Institutional Investors on Corporate Governance: A View of Swiss Pension Funds in a Changing Financial Environment

Theories on corporate governance have developed in line with the development of the financial markets and the increasing power of institutional investors. Indeed, the financial markets' power can be measured by the ability of shareholders, and of institutional investors in particular, to influence businesses and their managers. A number of reforms have been implemented in several countries, Switzerland included, in order to strengthen shareholders' powers. Making specific reference to Swiss case studies, this paper aims to create a better understanding of the role of institutional investors in corporate governance. Indeed, Switzerland is paradoxical in that it is generally considered Rhenish, with banks and families taking a leading role in controlling big business (David et al. 2004; Windolf & Nollert 2001), whilst developing a pension fund system which, since the mid-1980s, has attracted considerable funds and is still experiencing strong growth. How do these two approaches, traditionally at opposite ends of the spectrum as far as the subject's literature is concerned, reconcile themselves in the Swiss market?

Enhancing the efficiency of securities markets in East Asia

We explore the relative efficiency of stock markets across countries using newly available data on transactions costs and the quality of the informational environment of stock markets. These new measures are constructed from firm-level stock returns in a panel of 60 countries for the period 2000–2004. We develop a framework to understand the linkages between efficiency, liquidity, transactions costs, and informational quality and then study their determinants. We find that some institutional arrangements – such as the availability of stock lending and short selling – and the openness of markets are associated with lower transactions costs. We also find that, although disclosure rules for directors and officers of listed firms are essential, the ability of shareholders to seek redress is more conducive to a better informational environment in stock markets. This in turn serves as the basis for policy recommendations for the East Asian region. In particular, the region needs to continue to strengthen the implementation and enforcement of corporate governance, to further enhance the market and institutional infrastructure, and focus on measures to foster a larger and more diversified investor base, in order to continue to see gains in the efficiency of stock markets.

Option-based Compensation: Panacea or Pandora's Box?

During the past decade, investors have become increasingly concerned about the proliferation and size of stock option plans. Shareholder concerns center on four main issues. First, the cost of option-based compensation may exceed the associated benefits, resulting in excessive transfers of wealth from shareholders to optionholders. Second, the current accounting for and disclosure of option-based compensation may not be adequate for valuation purposes. Third, although many companies submit option plans to a shareholder vote, it appears that some companies may use exchange and market rules to avoid the shareholder approval process. Given the potential for stock option plans to transfer large amounts of wealth from shareholders to optionholders, the ability of shareholders to vote on option plans is seen as a critical corporate governance issue. Fourth and finally, with recent stock-price declines, many employees now hold out-of-the-money or underwater options. In order to retain and motivate employees, some corporations have responded by repricing or replacing underwater options with new grants. This replenishment has raised shareholder concern that the practice effectively rewards employees for failed performance, and that repricing undermines the rationale for using options as incentive compensation in the first place. Although recognizing that there are potential benefits of option-based compensation, the primary focus of the paper is on (1) measuring the 'cost' of option-based compensation, (2) management actions to deal with underwater options, and (3) shareholder concerns about the use of stock options. Shareholder concerns suggest that the use of option-based compensation will continue to be a hot-button corporate governance issue.

OPTION‐BASED COMPENSATION: PANACEA OR PANDORA'S BOX?

During the past decade, investors have become increasingly concerned about the proliferation and size of stock option plans. Shareholder concerns center on four main issues. First, the cost of option-based compensation may exceed the associated benefits, resulting in excessive transfers of wealth from shareholders to optionholders. Second, the current accounting for and disclosure of option-based compensation may not be adequate for valuation purposes. Third, although many companies submit option plans to a shareholder vote, it appears that some companies may use exchange and market rules to avoid the shareholder approval process. Given the potential for stock option plans to transfer large amounts of wealth from shareholders to optionholders, the ability of shareholders to vote on option plans is seen as a critical corporate governance issue. Fourth and finally, with recent stock-price declines, many employees now hold out-of-the-money or underwater options. In order to retain and motivate employees, some corporations have responded by repricing or replacing underwater options with new grants. This replenishment has raised shareholder concern that the practice effectively rewards employees for failed performance, and that repricing undermines the rationale for using options as incentive compensation in the first place. Although recognizing that there are potential benefits of option-based compensation, the primary focus of the paper is on (1) measuring the 'cost' of option-based compensation, (2) management actions to deal with underwater options, and (3) shareholder concerns about the use of stock options. Shareholder concerns suggest that the use of option-based compensation will continue to be a hot-button corporate governance issue.

Unbundled stock units and modern finance theory

This paper examines the offerings of unbundled stock units by financial firms in the late 1980s. The experience of these firms is compared with modern finance concepts to examine the validity of these concepts in this context. The ability of shareholders to adjust their risk exposure without the assistance of corporate level actions is confirmed