Corporate Finance I
Reading 31. Introduction to Corporate Governance and Other ESG Considerations
Learning Outcome Statements
g. describe market and non-market factors that can affect stakeholder relationships and corporate governance;
CFA Curriculum, 2020, Volume 4
Subject 6. Factors Affecting Stakeholder Relationships and Corporate Governance
Shareholder engagement involves a company's interactions with its shareholders. It can provide benefits that include building support against short-term activist investors, countering negative recommendations from proxy advisory firms, and receiving greater support for management's position.
Shareholder activism encompasses a range of strategies that may be used by shareholders seeking to compel a company to act in a desired manner. It can take any of several forms: proxy battles, public campaigns, shareholder resolutions, litigation, and negotiations with management.
Corporate takeovers can happen in different ways: proxy contest or proxy fight, tender offer, hostile takeover, etc. The justification for the use of various anti-takeover defenses should rest on the support of the majority of shareholders and on the demonstration that preservation of the integrity of the company is in the long-term interests of shareholders.
These factors include the legal environment, the media, and the corporate governance industry itself.