Page 9 - FINAL CFA SLIDES DECEMBER 2018 DAY 11
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Session Unit 10:
34. Corporate Governance and ESG: An Introduction
LOS 34.g:
Describe market and non-market factors that can affect
stakeholder relationships and corporate governance., p. 7
Activist shareholders pressure companies in which they hold a significant number of shares for
changes, often, changes they believe will increase shareholder value.
Proxy fight – a group of shareholders seek the proxies of other shareholders to vote in favor of
their alternative proposals and policies.
tanties
Tender offer -an activist group attempts to acquire say 51% of votes to take over the company.
Hostile takeover -one not supported by management, can incentivise pursuit of policies more
alignment with the interests of shareholders.
An important non-market factor is the legal environment:
• Common-law system -judges’ rulings have precedent value -shareholders’ and creditors’
interests are considered to be better protected in countries with this system of law!
• Civil law system -judges are bound to rule based only on specifically enacted laws –Creditor’s
rights are more clearly defined than shareholders’ and, therefore, are not as difficult to enforce
through the courts
