An organisation should work to increase value for shareholders and confront the needs of other non-shareholder stakeholders. Such stakeholders include employees, trade unions, customers, suppliers, local communities, and society.
Corporate governance stands as a set of practices and principles that ensure the successful operations of organisations. It is a mutually accepted standard based on what organisations and shareholders have gathered about the areas of and around business that are most likely to create long-term corporate success. Ideal practices in this regard reflect the respective duties and responsibilities of board managers and shareholders.
Organisations are in a continuous process of compliance with federal, state, and local regulations and acts of corporate governance are, for the most part, self-regulatory. Companies that adhere to best practices are less likely to endure the risk of shareholder activism.
What is Shareholder Activism?
At the heart of activism of any kind is the drive for change. Within an organisation, it is what shareholders turn to when they feel that those in management positions are not optimising its potential. This activism can range from a proxy battle to proposals seeking policy changes. The form that it takes is typically dependent on the kind of investor and their requirements.
To either prepare for or avoid shareholder activism, an organisation and its managers need to understand the current landscape. Valuable questions to consider include: Who are the activists? What do they hope to achieve? What strategies do they employ?
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Shareholder Activism in Driving Better Corporate Governance
Shareholder activism is vital for effective corporate governance as it ensures robust management and approaches to investments, creating value for shareholders. The principles of what is considered good governance place great emphasis on the trustee responsibilities of board managers in governing the organisation’s assets. There is much concentration in duty of care, which fosters an environment in which shareholders are confident to ask more questions concerning strategic planning, risk management, and overall operations. Furthermore, shareholders are looking for information about the organisation’s approach to environmental, social and governance concerns and the investment styles and principles related to these.
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