The investor rights movement, also called shareholder activism, refers to the efforts of shareholders of publicly traded companies to ensure managements are more accountable for their actions. The idea of shareholder activism emerged following the stock market crash in late 1929, which was caused by market manipulation and a lack of transparency on the part of companies. Like the Securities Act of 1933, this movement seeks to improve disclosure, accountability and responsibility among company managers, and to accomplish this through formal proposals as well as informal dialog. (You can read more about this in The Biggest Market Crashes in History.)
To be involved in the investor rights movement, a person must:
- possess shares registered in his or her name or hold a proxy statement
- have read every proposal in the information circulars sent by the companies to determine how to vote as a shareholder
- make an effort to attend the annual shareholders' meeting.
Proxy statements are documents that companies are required to send out to their shareholders. With these forms, a shareholder can appoint someone, such as an investment dealer or management, to make a decision and vote on his or her behalf. The proxy statements provide details about the process of electing in-house directors and give the shareholder the opportunity to make an informed decision.
Although the investor rights movement calls for many issues to be addressed, a major point investor rights argues for is the annual election of a company's entire board of directors. In many cases, companies use a stagger system, in which only part of the board comes up for re-election in any one year. Investor rights advocates argue that this system prevents continuity in the boardroom and is an obstacle in terms of shareholder and director communication.
Another concern for shareholder activists is fair representation of shareholders. When massive corporations are held largely by trustees, the opinions of individual investors are not usually heard. The proposed solution is cumulative voting, which entitles each shareholder one vote per share times the number of directors to be elected. In this way, all the votes of small, individual investors can be applied toward one specific director.
Even former board members have become involved with the investor rights movement. Directly witnessing corporate misdeeds has inspired some to work to improve the relationship between management and owners.
If you want to know more about this subject, see Knowing Your Rights as a Shareholder.
Find out how modern companies can assess business risks, how those risks can be identified and categorized, and why there ...
Understand the key features of corporate governance and the factors that have led it to grow significantly in importance ...
Learn the effects the Sarbanes-Oxley Act has on corporate governance in the United States, including strict disclosures, ...
Learn how C-suite officers affect shareholders; discover how the CEO impacts financial performance and why governance is ...
A takeover defense strategy in which the target company issues ...
A UK program that helps smaller, riskier companies to raise capital ...
A share of stock owned by a shareholder who has agreed to a takeover.
An anti-acquisition strategy in which the target company provides ...
An anti-takeover strategy in which the company being targeted ...
The cut-off date established by a company in order to determine ...