Resources for shareholder activism - Hermes Principles and the example of People’s Solidarity for Participatory Democracy (PSPD)

In this time of recession/financial downturn, we see lots of frauds on listed companies, majority shareholders trying to buy out and delist companies at cheap price, actions by majority companies that are detrimental to minority shareholders’ welfare etc..

Ever wonder, can minority shareholders do something to protect themselves from onslaught of these companies’ management ?

Shareholder activism is the answer.

European Corporate Governance Institute (ECGI) has a good write-up and resources on shareholder activism. There are proponents and opponents on shareholder activism. Some research reports are available in the website which argue on different angles.

Hermes (which is also featured in ECGI website above) has come out with Hermes Principles for corporate governance.

These are the principles concerning requirement that companies be run in the long term interest of shareholders. Read the PDF files for details. Its principles are on:
1. Communication
2. Financial
3. Strategic
4. Social, Ethical and Environment.

These principles can be a guideline for minority shareholders to ask companies’ management to adhere to.

In reality, companies’ management often doesn’t heed the opinions of minority shareholders.
What then should minority shareholders do ?

We can take a look at Korea’s shareholder activist group :
People’s Solidarity for Participatory Democracy (PSPD)
One of its articles in the website mentions some basic methods for shareholder activism: (read the article as it comes with examples and resources)

Participating in the Corporate Decision Making Process
1. Attending Shareholders Meetings
2. Shareholder Proposals
3. Proxy Solicitations
4. Convening Extraordinary Shareholders Meetings
5. Policy Recommendations

Preventive Measures and Monitoring the Behavior of Management
1. Inspection of Books and Records, Appointment of Inspectors Demands to Cease Illegal Activities
2. Injunctions to Prevent Illegal Acts of Management
3. Policy Recommendations
4. Holding Management Accountable for Their Conduct

Shareholder Derivative Actions
1. Criminal or Administrative Complaints
2. Demanding the Dismissal of Responsible Officers.
3. Policy Recommendations

Shareholders, unite ! :)

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