Recent Trends In Shareholder Activism And Its Impact On The Firm's Financial Performance And Its Governance
Nagesh Rudrakanthwar, Company Secretary and in-house Legal Counsel, LLM (Jindal Global Law School), LLB, CS, MBA (Finance) and PGDTL
ABSTRACT
In India, shareholders' activism has got quite a buzz in recent times. The numerous recent incidents in India where shareholders have rejected the boards' recommendations show how they exercise their voting power to influence management to abide by the governance norms. This trend makes the corporates more responsible and shapes their traditional approach from promotership into trusteeship. The growing governance lapses, giving impetus to regulators to strengthen the regulations and give more teeth to the shareholders. Those corporates who used to take shareholders for granted and put their interest before the company's interest or failed to observe their fiduciary duties have already observed the heat of this; in some instances, the shareholders ousted some directors who were failed to meet their duties. The effect of this shift can be seen from the recent incidents when shareholder activism was observed in matters such as re-appointment or appointment proposals, proposals for increasing the remuneration of executive directors, related party transactions, merger proposals, restructuring transactions, etc. Though the regulatory impetus gave shareholders a level playing field to show their presence, it is still not making a difference for varied reasons.
This research attempts to analyse the impact of shareholder activism on the firm's financial performance and governance. The research also analyses the impact of recent regulatory changes on shareholder activism.
