FSA gives green light to shareholders acting in concert
A noteworthy addendum to Sir David Walker’s review of corporate governance is the open letter from the FSA to the Chairman of the ISC dated 19 August 2009.
This letter flags up the FSA’s support for more active shareholder engagement in disputes with boardrooms, with a view to promoting good corporate governance. This encouragement of shareholder activism at this level may be an important development.
The actual purpose of the letter is to address the concerns of institutional investors in large companies who may be concerned that they risk committing regulatory offences relating to market abuse, disclosure of substantial shareholdings or change of control if they act in concert with other shareholders.
It will be interesting see whether such high level support for shareholder activism gradually filters down to the judiciary. In particular, whether this ultimately has an impact on the deployment of the relatively underused derivative action.
Traditionally Judges have been reluctant to disturb the essential legal position that a company is controlled by its directors and the power of the shareholders lies in choosing those directors. However, a greater focus on shareholder rights at a governmental level might mean a re-think at the common law level even without additional legislation. The legal tools for shareholder activism in all size companies already exist although sometimes they can be very blunt. Are we going to see greater judicial flexibility in the use of these tools?
Tags: Corporate Governance, shareholder rights
Corporate Governance, shareholders rights | Ed Weeks | 
September 11, 2009 4:58 pm
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