Shareholder activism is a means by which shareholders voice their concerns or
dissatisfaction in companies in which they invest. This phenomenon started centuries
ago, but picked up momentum and developed in the United States of America (âUSAâ) in
the 1930âs, after the fall of Wall Street in 1929. Soon thereafter, it spread to countries
such as the United Kingdom and to the rest of the world.
In the USA in 1934 the government passed the Securities and Equities Act, which also
contains proxy rule Rule 14A-8. This rule is used as a tool to encourage shareholders to
make proposals on matters to be voted on at annual general meetings. It introduced
internal corporate governance approaches such as the ânegotiated agreementsâ, the
ânexus of contractâ and the âone axisâ approach.
In South Africa, section 185 of the Companies Act 61 of 1973 makes provision for
shareholders to draw proposals to be presented at annual general meetings. Section 65
of the Companies Act 2008 will also afford shareholders to make proposals.
A company is made up of shareholders. Shareholders are people or entities that have an
economic interest in a company. Examples of shareholders include private individuals,
directors, employees, customers, community, government, trade partners, media,
creditors etc. Shareholders can be classified as individuals or institutional. Institutional
activists include public pension funds and private equity funds. They can be business
associations, social activists and labour unions. They can have a direct or indirect
beneficial interest in a company. Shareholders can also be classified as preference,
controlling, majority and minority shareholders.
Companies can be incorporated as private or public. A company can be held liable for
the actions of its directors. Shareholders have rights and duties in a company. These
include the right to vote, monitor and elect directors etc. A company is juristic person
with its own status. In terms of the rule in Foss v Harbottle a company can take legal steps against itself and if it fails any person can take legal steps on its behalf. A person
who deals with a company is protected under the Turquand Rule. This rule allows
persons who are dealing with a company to assume that all internal company matters
have been complied with and that the agent of a company is not acting ultra vires.
Companies are managed by directors who are appointed by shareholders. Directors
should be natural persons who are not minors, or have committed serious offences or
are unrehabilitated insolvents. Directors have duties such as to act intra vires, to
exercise care, diligence and skill; to keep confidential information; to manage risks and
to act as a board. Directors can be held jointly and severally for their actions. Directors
can be executive, non-executive or independent non-executive directors. Directorship is
terminated when a director has committed serious offences and are unrehabilitated
insolvents or by agreement with a company.
Reasons for shareholder activism include corporate governance. There are different
systems of corporate governance such as âinsider dominatedâ, âoutsider dominatedâ,
âcomply or elseâ and âcomply or explainâ.
Sometimes shareholder activism has an influence over the way companies are
managed. Due to shareholder activism, a company can change its management style,
transform and change policies.
The media, such as press, internet, radio and television play an important role in
shareholder activism and therefore shareholder activists avoid the lengthy judicial
process and opt for media to raise their discontent.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:ufs/oai:etd.uovs.ac.za:etd-11222010-135634 |
| Date | 22 November 2010 |
| Creators | Lekhesa, Motlatsi William |
| Contributors | Prof E Snyman-van Deventer |
| Publisher | University of the Free State |
| Source Sets | South African National ETD Portal |
| Language | en-uk |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.uovs.ac.za//theses/available/etd-11222010-135634/restricted/ |
| Rights | unrestricted, I hereby certify that, if appropriate, I have obtained and attached hereto a written permission statement from the owner(s) of each third party copyrighted matter to be included in my thesis, dissertation, or project report, allowing distribution as specified below. I certify that the version I submitted is the same as that approved by my advisory committee. I hereby grant to University Free State or its agents the non-exclusive license to archive and make accessible, under the conditions specified below, my thesis, dissertation, or project report in whole or in part in all forms of media, now or hereafter known. I retain all other ownership rights to the copyright of the thesis, dissertation or project report. I also retain the right to use in future works (such as articles or books) all or part of this thesis, dissertation, or project report. |
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