Skip to main content

Agreement in Principle: A Compromise for Activist Shareholders from the UK Stewardship Code

Posted by on Tuesday, June 16, 2015 in Notes, Vol. 48 No. 2, Volume 48, Volumes.

Equity ownership in the United States and Europe is now highly concentrated in the hands of institutional investors, which gives rise to new problems of agency and corporate governance. These large investment intermediaries, such as mutual funds, specialize in maximizing beneficial owner value based on short-term performance benchmarks but lack the expertise and incentive to actively engage corporate boards on business strategy and governance matters. Instead, institutional investors are “rationally reticent,” meaning that they are willing to respond to governance proposals but not to propose them. Activist shareholders may offer an endogenous solution to address “latent activism” in institutional intermediaries and, ultimately, spur the effective monitoring of corporate boards. Activist shareholders, such as hedge funds, often achieve their business strategy and governance objectives by obtaining toehold positions in a corporation and soliciting support from institutional investors for their governance proposals. However, this solution is in jeopardy. Recently proposed regulatory changes in the United States track adopted legislation in the United Kingdom and Europe, and pose a threat to domestic activist shareholder success. This Note argues that incorporation of the UK Stewardship Code’s Principle 5 into the U.S. regulatory scheme may help alleviate the potentially chilling effects of the proposed rule-making on shareholder activists.

 

Leave a Response


ExpressO Top 10 Law Review


ANNOUNCEMENTS

The Journal is pleased to announce its 2018-2019 Board of Editors. View the complete masthead here.

Vanderbilt University Law School Professor Michael A. Newton’s 2016 VJTL Article entitled How the International Criminal Court Threatens Treaty Norms  was cited by the International Criminal Court prosecutor’s November 2017 filing seeking investigation into war crimes in Afghanistan.

May 2018 Issue on the Second Israel Defense Forces International Conference on the Law of Armed Conflict. Read more about the Journal’s May 2018 issue here.

Thank you to everyone who attended the Journal’s 50th Anniversary celebration on October 5, 2017! View photos from the event here and read about the Journal’s history here.

Connect with the Vanderbilt Journal of Transnational Law on LinkedIn.

The Journal is pleased to listed as the #5 International Law Journal by the 2017 Washington and Lee Law Journal Rankings.

The Journal is very excited about the success of our February 2017 Symposium, “Sovereign Conduct on the Margins of the Law.” Read more about our February 2017 Symposium here

Please join us in congratulating the Vanderbilt Journal of Transnational Law 2017-2018 Write-On Competition Winners.

Video is available from the Vanderbilt Journal of Transnational Law’s 2015-2016 SymposiumThis is Not a Drill: Confronting Legal Issues in the Wake of International Disasters. Watch here.