Given the increasing attention that institutional shareholders are placing on good corporate governance and the dedicated efforts of shareholder activist firms to improve the governance at the companies in which they invest, the overall quality of the boards of directors of public companies is under growing scrutiny. As the board is responsible for maintaining oversight and is ultimately accountable to the owners of the company, namely the shareholders, the composition of a company’s board is of paramount importance.
Considering the pivotal role that the board plays, shareholder activist firms seeking to improve the underlying value of a company often seek to effect change at the board level, the thinking being that a company’s undervaluation is due in part to sub-optimal decisions made by an ineffective board. The majority of shareholder activist firms are hedge funds with the ability to invest in publicly-traded stocks, though there are (very) rare occasions when an institutional investment firm such as a mutual fund takes on the role of shareholder activist.
Support authors and subscribe to content
This is premium stuff. Subscribe to read the entire article.