The Tension Between Boards and Investors

Philadelphia partner Doug Raymond recently published a Directors & Boards article titled "The Tension Between Boards and Investors,” exploring the veritable tug of war between boards and shareholders as it relates to their corporate governance function. For its part, the Securities and Exchange Commission (SEC) has adopted measures to shore up shareholder rights – from mandated shareholder voting on executive compensation to expanded proxy access for shareholder-nominated directors. These trends also coincide with an uptick in shareholder and derivative litigation challenging board action. In turn, many boards have responded by adopting bylaws that “discourage litigation against them” and constrain shareholder rights.

Doug reasons that the current dynamic presents an opportunity for more constructive dialogue, and as he notes, “the shift toward more active engagement by shareholders, and the more recent examples of resistance to this should cause thoughtful boards to consider more broadly the proper role that their shareholders should play in decisions affecting the company.”