Title: Reformed and engaged boards – not activist shareholders

Authors: Coral Ingley, Morina Rennie, Jens Mueller, Graham Cocks, Donald Warrick, Liljana Erakovic

Addresses: Department of Management, Auckland University of Technology, Private Bag, Auckland, New Zealand. ' Faculty of Business Administration, University of Regina, 3737 Wascana Parkway, Regina, Saskatchewan, Canada. ' Waikato Management School, P.O. Box 3100, Greerton/Tauranga, New Zealand. ' Melbourne Business School, 200 Leicester Street, Carlton Victoria 3053, Australia. ' University of Colorado at Colorado Springs, 1420 Austin Bluffs Parkway, Colorado Springs, CO 80918, USA. ' The University of Auckland Business School, Owen G Glenn Building, 12 Grafton Road, Auckland, New Zealand

Abstract: This study considers the legitimacy of shareholder activism as a means of exercising influence in the corporate decision-making process and identifies self-reformed boards as a superior solution to the issues that activists attempt to address. We conceptualise the board of directors| role as representing the interests of multiple principals. When any one principal is able to serve its own interests by influencing corporate decision-making through shareholder activism, other principals| interests may be compromised. We argue that a better long-term solution lies not with activist shareholders, but with culturally reformed boards. We suggest a set of self-reform initiatives that would help them to achieve their potential. We develop a conceptual framework for the arguments in favour of boards taking a leadership role in corporate engagement with shareholders and stakeholders. To the extent that boards are unable to implement self-reform, governments may need to develop public policy initiatives for corporate governance reform.

Keywords: activists; shareholders; investors; multiple principal agency theory; engagement; corporate decision making; self-reformed boards; leadership; shareholder activism; board of directors; director role; public policy; corporate governance reform.

DOI: 10.1504/WREMSD.2011.040811

World Review of Entrepreneurship, Management and Sustainable Development, 2011 Vol.7 No.3, pp.302 - 329

Available online: 26 Jun 2011 *

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