Shareholders flex their muscles
Ican’t be the only one who gets excited by the exercise of shareholder power. In a complex corporate world, where companies are very often far removed from their shareholders, it is inspiring when they have the opportunity and passion to wield their rightful influence.
In my view, nowhere is it more important than in the sphere of corporate governance – which in the best companies goes to the very root of their culture.
This week, Fonterra Shareholders’ Council chairman Duncan Coull thanked Fonterra farmers for their engagement throughout its governance and representation review process and said he was ‘‘encouraged’’ by the significant support the board’s resolution received at a special meeting in Hamilton to discuss the issue.
The proposal, which sought shareholder support to change aspects of the co-operative’s governance and representation structure and was endorsed by the Fonterra board, the shareholders’ council and an independent expert panel headed by Chris Moller, achieved 63.74 per cent support – 11.26 per cent less than the 75 per cent needed to implement its recommendations.
While this was publicly welcomed by Coull, the result was a demonstration that post-global financial crisis, Fonterra’s shareholders had joined other notable groups in wholeheartedly flexing their power. Also inspiring about this particular vote was the high level of farmer participation.
The question of engagement is a difficult one, but it has definitely been easier to assess since the global financial crisis, when the abuse of corporate power in some quarters sent firms into a tailspin around the world. Until then, many shareholders of blue chip companies had little to worry about. They could sit back and watch the dividends roll in.
Now it’s a different story. Tougher economic times have led many more investors to want to keep a sharp eye on board activities. Conversely, boards know they are under increasing scrutiny and must have an open dialogue to get their shareholders aligned with their objectives.
Better, rounder, more democratic corporate governance would be a worthwhile reward to emerge from years of global economic misery.