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Archive for December, 2013

The increase in strategic and operational activism by shareholders.

December 26, 2013 Leave a comment

Scott Hirst, co-editor at Harvard Law School Forum on Corporate Governance and Financial Regulation, recently published at the HLS blog a post that brought forward the increase in the number and volume of shareholder activist actions connected with strategy or operational matters. (1)

As the author outlines, activism is just one of the features of the transition or rebalance of power from directors and boards, (director-centric model) to shareholders. And, even if a majority of shareholder proposals or interventions might follow their own interests or agendas, there is an increase in the number of actions that are mainly focused on the firm`s agenda, and particularly on operational or strategic matters.

These actions are the result of a relevant investment in research and analysis, so that these investors, even in big market cap firms, risk to invest large amounts of money in the hope that their views on how these companies could be restructured are favored by other investors but mainly understood by boards. Read more…

Visionary Board leadership. Stewardship for the Long term.

December 11, 2013 Leave a comment

What are the areas where boards need to focus on to help the company increase its long-term value?

In this post we will comment the article by the CFA Institute “Visionary Board leadership. Stewardship for the Long term”, by Matthew Orsagh, CFA, CIPM. (1)

They try to describe Visionary Directors: directors that are “committed to working with management to make a company successful in the long-term”. In other words, a Visionary Director does not allow for “corner-cutting strategies to meet fleeting short-term expectations”. Directors, (if properly embedded in visionary boards) strengthen leadership and foresight to fight against the short-termism reigning in the boardroom.

There are some areas in which a director can make a difference; (i) for instance, if he/she develops and appropriate role in strategic planning and oversight; (ii) if they correctly define the risk appetite of the firm, if they ensure an Enterprise Risk Management system is in place and they oversee its execution; (iii) if they establish Compensation systems that push employees and managers to long-term value creation; (iv) or if they define the correct long-term culture of the firm. Read more…