Shareholder Activism

Holding The Officers and Directors of Public Companies Accountable

Shareholders of publicly traded corporations harbor firm and justified expectations concerning the management and nurturing of their invested assets. That holds equally true for both a public company’s largest shareholders and individuals and entities possessing more modest holdings.

One way to demand and ensure accountability and management integrity is to file a shareholder derivative action. The goals pursued through a derivative lawsuit can be broad-based, ranging from corporate governance reforms to recouping ill-gotten gains.

Litigation may be extreme in some instances, though, especially when shareholders can achieve sought-after reforms in other ways. A lawsuit is sometimes the ideal vehicle for forging positive change, but shareholders often have other options as well.

Shareholder activism: multiple avenues for change

The financial analyst certification group Corporate Finance Institute prominently notes that shareholders can forge material change in a company by pursuing various strategies.

In doing so, CFI importantly notes that activist shareholders can command clout even when their company presence is not marked by a huge equity stake. Effective activist strategies include these methods for promoting change:

  • Shareholder resolution (submitted for vote at an entity’s annual meeting; CFI notes that a resolution can be “reasonably effective at engaging the public’s attention”)
  • PR initiatives, with increased public scrutiny of an issue sometimes helping to pressure internal change
  • Direct negotiation sessions with management
  • Proxy contests, with delegated voting powers often enabling a shareholder group to emerge as a potent change-inducing force

Shareholders often underestimate the power they can muster to drive corporate change. An experienced legal team with a demonstrated record of success in shareholder rights matters can provide further information.

Having information at your fingertips is easier than ever. Enroll in Robbins LLP’s free investment monitoring service, Stock Watch, for notifications of corporate misconduct impacting the value of your investments, advice on how to hold corporate officers and directors accountable for their misconduct, and to receive information about class action settlements.