Corporate Governance

and ESG
Factors Affecting Stakeholder
Relationships and Corporate
Governance
© 2019 by Keith Tan. All rights reserved.
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Corporate Governance
and ESG
Factors Affecting Stakeholder
Relationships and Corporate
Governance
1. Market Factors
2. Non-Market Factors
 Market Factors

Shareholder Engagement Shareholder Activism Competitive Forces

Factors Affecting Stakeholder Relationships and Corporate Governance

1. Market Factors 2. Non-Market Factors
 Shareholder Engagement Shareholder Activism Competitive Forces

company’s interactions with its shareholders

This
AGM company’s
board and
management
is great!
Board of Directors

Shareholders

Management

more communication/
contact with
shareholders

Factors Affecting Stakeholder Relationships and Corporate Governance

1. Market Factors 2. Non-Market Factors
 Shareholder Engagement Shareholder Activism Competitive Forces

The The company has

board is not AGM communicated the
qualified situation with us and
enough! we trust they are doing
their best!
Board of Directors

Shareholders

The company Management

Change the
is doing so badly entire board!
the entire The
management team management
should be fired! remuneration is
too high!

Dissident Shareholder Groups

Factors Affecting Stakeholder Relationships and Corporate Governance

1. Market Factors 2. Non-Market Factors
Shareholder Engagement Shareholder Activism Competitive Forces

Strategies by shareholders to create change within the company / modify its behaviour.

We demand change!
Proposal for
shareholder
Board of Directors
resolution

Management Activist Shareholders

Raise the issues to other

shareholders / public

Shareholders

Factors Affecting Stakeholder Relationships and Corporate Governance

1. Market Factors 2. Non-Market Factors
Shareholder Engagement Shareholder Activism Competitive Forces

Strategies by shareholders to create change within the company / modify its behaviour.
You are not
allowed to
pursue legal We demand change!
action through
the court!

Shareh
older
Board of Directors deriva
tive
lawsui
ts

Management Activist Shareholders

against the directors,
management, and/or
controlling shareholders

Factors Affecting Stakeholder Relationships and Corporate Governance

1. Market Factors 2. Non-Market Factors
Shareholder Engagement Shareholder Activism Competitive Forces

We demand change!

Board of Directors

I need to take a
Management more active role to Activist Shareholders
increase the value
of my shares!
Hedge funds are
predominant
shareholder activists

Factors Affecting Stakeholder Relationships and Corporate Governance

1. Market Factors 2. Non-Market Factors
 Shareholder Engagement Shareholder Activism Competitive Forces

can help align managerial interests with those of its shareholders

Better focus on
shareholder
interests, else we Corporate Takeover
get voted out!
replacement of entire board
and/or management

Board of Directors
Proxy contest
shareholders are persuaded to
Better focus on vote for group seeking control
maximising Group seeking control
Management
shareholder
wealth, else we
get sacked!

Shareholders

Factors Affecting Stakeholder Relationships and Corporate Governance

1. Market Factors 2. Non-Market Factors
Shareholder Engagement Shareholder Activism Competitive Forces

can help align managerial interests with those of its shareholders

Corporate Takeover

replacement of entire board

and/or management

Board of Directors
Tender Offer
shareholders sell their shares
SharesShares
to group seeking control Shares

Management Group seeking control

Shareholders

Factors Affecting Stakeholder Relationships and Corporate Governance

1. Market Factors 2. Non-Market Factors
 Shareholder Engagement Shareholder Activism Competitive Forces

can help align managerial interests with those of its shareholders

We can’t let Corporate Takeover

this happen!
replacement of entire board
and/or management

Board of Directors
Hostile Takeover
acquire company without SharesShares
SharesShares Shares
management consent Shares

Management Group seeking control

Anti-Takeover Measures
Staggered Board Not good
for us!
dilutes the value of shareholder
voting rights by eliminating the
ability of shareholders to replace
the entire board at once Shareholders
Shareholder Rights Plan “Poison pill”
requires shareholders to fork out extra
cash to buy additional shares if a
takeover group’s holdings reach a
certain threshold.

Factors Affecting Stakeholder Relationships and Corporate Governance

1. Market Factors 2. Non-Market Factors
 Non-market Factors

Legal Environment The Media Corporate Governance Industry

Factors Affecting Stakeholder Relationships and Corporate Governance

1. Market Factors 2. Non-Market Factors
Legal Environment The Media Corporate Governance Industry

Common Law System Civil Law System

e.g UK, US, India, HK e.g Japan, France, Germany

I am bound to
My rulings can rule based only on
become the law! specifically
enacted laws

Able to appeal for judge to rule Generally not possible to convict

against management actions that when an action is not expressly
are not expressly forbidden by law forbidden by law

Creditors Shareholders

Factors Affecting Stakeholder Relationships and Corporate Governance

1. Market Factors 2. Non-Market Factors
Legal Environment The Media Corporate Governance Industry

Shareholder disputes
with management are
more legally complex
Creditors

RIGHTS generally
more clearly
defined than Shareholders
RIGHTS

Factors Affecting Stakeholder Relationships and Corporate Governance

1. Market Factors 2. Non-Market Factors
Legal Environment The Media Corporate Governance Industry

In the past

Shareholders

Board of Directors
Media

Public Opinion
Management

Dissident Shareholders
Factors Affecting Stakeholder Relationships and Corporate Governance
1. Market Factors 2. Non-Market Factors
 Legal Environment The Media Corporate Governance Industry

Today

Better make Shareholders

sure we are on
our toes!
Board of Directors
Media

Public Opinion
Management
@iamactivist
directors and management have more The board is not doing their job in
incentive to be transparent and communicate protecting the interests of PQR Corp’s
more openly with shareholders shareholders!

Dissident Shareholders
Factors Affecting Stakeholder Relationships and Corporate Governance
1. Market Factors 2. Non-Market Factors
Legal Environment The Media Corporate Governance Industry

Board of Directors Corporate Governance

Industry Shareholders

Best Practises Corporate

for Corporate Governance
Management
Governance Rating for
PQR Corp

Factors Affecting Stakeholder Relationships and Corporate Governance

1. Market Factors 2. Non-Market Factors
Legal Environment The Media Corporate Governance Industry

mandate
US-registered
Mutual Funds proxy vote in
best interests of
catalyst fund investors

Corporate Governance
Industry

Factors Affecting Stakeholder Relationships and Corporate Governance

1. Market Factors 2. Non-Market Factors
 Legal Environment The Media Corporate Governance Industry

mandate
US-registered
Mutual Funds proxy vote in
best interests of
fund investors

Helped to
promote better Corporate Governance
corporate Industry
governance

Factors Affecting Stakeholder Relationships and Corporate Governance

1. Market Factors 2. Non-Market Factors
 Market Factors

Shareholder Engagement Shareholder Activism Competitive Forces

Non-market Factors

Legal Environment The Media Corporate Governance Industry

Factors Affecting Stakeholder Relationships and Corporate Governance

1. Market Factors 2. Non-Market Factors
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