Shareholder engagement is pivotal in corporate governance, evolving beyond formal resolutions to impact business decisions. This chapter unveils the typically undisclosed dynamics of board-shareholder engagement through a survey of 171 SEC-registered corporations, targeting corporate secretaries, general counsel, and investor relations officers. The survey was complemented by a review of the disclosure on shareholder voting and engagement included in proxy statements filed by Russell 3000 companies during the 2018–2022 meeting seasons. Larger and mid-sized companies more frequently engage than smaller organizations. Engagement, often with major asset managers, can take a confrontational turn, particularly with hedge funds at smaller firms. Topics include executive incentive plans, ESG metrics, GHG emission reduction, workforce diversity, pay equity, and political spending. The study reveals that engagement significantly influences corporate practices, leading to changes, withdrawal of proposals, alterations in proxy votes, and the inclusion of engaged shareholder-nominated directors in management slates.

Corporate governance debates have undergone a fundamental shift, with environmental,social and governance (“ESG”) issues coming to the forefront of decision-making by boards, executives and shareholders. Across a spectrum ofstakeholders, companies and their boards face pressure to incorporate ESG considerations into their business strategies, including strategies around merger and acquisition (“M&A”) transactions. This chapter addresses how the growth of ESG is poised to affect board and shareholder engagement in M&A. For boards evaluating M&A deals, ESG factors are emerging as critical to all aspects of dealmaking, including selection of targets and buyers, due diligence, governance and integration, and financing. The ESG pressures on M&A deals also influence corporate governance in M&A – implicating board strategy and oversight in M&A, as well as shareholder engagement in M&A. In an ideal world, ESG information can help enhance board and shareholder decision-making around M&A. Yet, whether ESG considerations are likely to do so remains uncertain.

This introductory chapter provides the reader with data on institutional investors’ role in the governance of listed companies in the US and Europe. Drawing from various databases, we sketch out the phenomenon of share ownership reconcentration in the hands of institutional investors across jurisdictions, tracking the nationality and ownership of the largest asset managers and draw some implications therefrom. In particular, we look into whether divergence in ownership patterns (the presence vs absence of a controlling shareholder) and the identity and characteristics of asset managers may lead to divergence in the incentives structure for, and the focus of, shareholder engagement on the two sides of the Atlantic. Finally, we provide the reader with a roadmap of the book contents.

The right to elect and remove directors is a key feature of shareholder participation in corporate governance. Indeed, the ultimate form of board-shareholder engagement is for shareholders to have their representatives inside the boardroom. This chapter examines the role that minority shareholders play in nominating directors to corporate boards. Despite the growth in power of institutional investors, and their increasing commitment to investor stewardship, global asset managers almost never attempt to nominate director candidates themselves. Rather, the most effective instigators of minority shareholder board representation are activist hedge funds. This chapter makes three key contributions to the discussion on board-shareholder engagement. First, drawing on a hand-collected dataset of activist board representation campaigns at S&P 500 companies, it analyses the practice of activist hedge funds appointing directors to corporate boards. Second, it explores the implications these cases of activist-nominated directors may have on accepted wisdom regarding the role of the board. In particular, it is argued that activist‑appointed directors may expose some of the limitations of the current independent monitoring board model and exemplify a solution where boards proactively contribute to sustainable value creation. Third, the chapter explores how to facilitate broader institutional investor participation in the director appointment process.

One of the key claims of advocates of stakeholder capitalism, especially those in the legal academy, is that the foundational case – Dodge v. Ford Motor Co. – was not good law when it was first written, the key part of the decision, is mere dicta, and subsequent legal developments have undercut whatever validity the decision may have had at one time. All of these claims are demonstrably false. As Chief Justice Leo Strine put it, those who claim that shareholder value maximization is not the law are pretending.

AP Smith Mfg. Co. v. Barlow is the seminal case on the fiduciary duties of corporate directors with respect to profit maximization and corporate philanthropy. The chapter provides the factual context of the case and analyzes the law. The chapter situates the case in the famous debate between Adolf Berle and E. Merrick Dodd over shareholder value maximization. It provides context for the business communitys approach to shareholder capitalism.

There are very few cases holding directors liable for failing to maximize shareholder value. The reason is the business judgment rule, a corporate law doctrine that precludes judges from reviewing the merits of director decisions absent some evidence of fraud, illegality, self-dealing, failure to make an informed decision, or waste of corporate assets. Shlensky v. Wrigley is the classic case of the business judgment rules application to cases in which the directors are alleged to have failed to maximize profit.

Dodge v. Ford Motor Co. is the seminal case on the fiduciary duties of corporate directors with respect to profit maximization. The chapter provides the factual context of the case and analyzes the law.

Following the publication of a U.S. News and World Report article about ICN’s CEO, Panic, entitled “Sex and the CEO” detailing the pharmaceutical company’s expansive cover-up of workplace sexual harassment, a shareholder, White, filed suit against Panic for breaching his fiduciary duty by using corporate funds to resolve sexual harassment claims. The feminist rewrite finds that Panic and ICN’s board failed to exercise valid business judgment and did breach their fiduciary duty. The lack of diversity on ICN’s all-male boardroom is noted as a factor that led to the acceptance of Panic’s workplace sexual harassment and the allowance of corporate funds to actively conceal it. The examination refuses to sanitize the legal analysis to only rules and processes and instead chooses to analyze the case for its full revealing facts. The rewritten opinion views ICN’s board’s repeated decision to use corporate funds to settle sexual harassment cases as a proof of the fact that the board did in fact have actual knowledge of the persistent sexual harassment of its employees by Panic. Using precedent available at the time of White v. Panic, the feminist rewrite is able to come to the conclusion, which has become more common twenty years later in the post-#MeToo world.

The plaintiffs, John and Horace Dodge, owned a ten percent share in the defendant’s, Ford Motor Company (FMC), corporation. The Dodge brothers had recently started their own car company, but the Dodge Brothers retained interest in FMC, which had paid hefty dividends. Henry Ford very publicly decided to stop paying dividends to investors and to build a new plant in River Rouge, Michigan, which would drive competition for lower priced vehicles. The Dodge brothers filed this suit in response. The case highlights the debate over the fundamental purpose of business: investor benefit or societal benefit. Through the lens of feminist theory, Ford’s approach would promote both the financial interests of FMC and the equitable access to private transportation to the betterment of society. By withholding dividends, FMC could maintain a cash reserve in times of financial adversity; meanwhile, by driving down the price of cars, private transportation could be more widely available to even the most marginalized groups who were more likely to experience harassment on public transportation. The feminist perspective argues that the notion that a corporation’s only purpose being to immediately maximize profits for the sake of stockholders is too narrow a view.

Mrs. Pritchard became the director of a family-owned reinsurance firm, Pritchard & Baird Intermediaries Corp (P & B), following the death of her husband. Mrs. Pritchard’s two sons were executives of the company, which eventually went bankrupt. The plaintiff, trustee of the P & B’s bankruptcy estate, filed this suit against the deceased Mrs. Pritchard’s estate claiming she was negligently liable as director for the over $10 million her sons improperly removed from the firm. The feminist rewrite agrees with the original opinion that Mrs. Pritchard was negligent in her role of corporate oversight, but it deviates by arguing Mrs. Pritchard was not negligent for failure to notice the financial issues because she should not have been expected to understand the intricacies of the business of which she served mostly as the figurehead and emotional glue. The rewritten opinion points out the implicit bias built within the New Jersey directors’ duty statute, which refers to “prudent men.” The commentary argues Mrs. Pritchard chose not to extend great care because she was not compensated or given much actual power within P & B. The commentary also critiques the rewritten opinion’s dismissiveness of Mrs. Pritchard’s corporate knowhow as not feminist enough.

Steps taken to start a new venture can make for rocky road ahead if consideration is not given to the points reviewed in this chapter. How to select and build a team and fairly distribute the founder’s equity, how to select an advisory board or a board of directors, and the importance of establishing a culture within the new company are all points discussed in detail and highlighted through personal stories and case examples. The main components of a business plan are covered in many texts and blogs, so this chapter focuses on the practical issues that few academic texts discuss, such as: how to perform due diligence on your investors and tips on creating slide decks , pitching and presenting business plans, and structuring financials and milestone to meet investors key concerns. The sources of financing and expectations of investors are reviewed with a view to guiding the entrepreneur or executive through the key elements for success, including successful closing on a term sheet or preparing for due diligence so that the process moves smoothly towards closure of the financing. The specific challenges facing an academic technopreneur moving into a decision-making executive (CSO or CEO) role are reviewed and guidance offered on utilizing the strength of the team around them.

In Chapter 8, the spotlight is shareholder and stakeholder engagement. Boards that govern for the long term should actively engage shareholders – or oversee the interaction with them – learn from their suggestions and assure that the company has an adequate shareholder structure to carry out its activities and purpose. Boards should also understand how key stakeholders interact and create joint-value with the company, and how it can learn from them. Among the board’s responsibilities is to ensure the company has the right type of shareholders to pursue its purpose. A major assumption in many corporate governance studies is that shareholders are homogeneous and have the same preferences. The evidence indicates the contrary: Shareholders are heterogeneous. There is a wide variety of shareholders: family offices, pension funds, passive investors, private equity firm, hedge funds or governments, among others. Each shareholder is unique, with distinct time horizons and motivations. The board of directors needs to consider this diversity.

This chapter discusses the gaps in the conceptual foundations of responsible supply chain management. It tends to be explained under various corporate social responsibility (CSR) theories that do not account for the territorial and ‘self-interested’ behaviours that exist inside large companies. We’ll then discuss how firms reconcile core business drivers like cost competitiveness versus normative goals like protecting human rights. Finally, the chapter addresses the ongoing tensions around managing supply chains in host countries where corruption is endemic and institutional capacity is weak and fragmented due to a confluence of political, economic and social factors.

Courts, practitioners, and academics alike have long considered corporate officers and directors to be fiduciaries of the public corporation and its shareholders. As corporate law has evolved, however, with the business judgment rule strengthening, the duties of care and loyalty narrowing in scope, and executive compensation schemes further introducing self-interest into corporate decision making, the fiduciary paradigm is no longer an accurate description of the nature of the relationship between corporate managers and the corporation. Corporate officers and directors have significant latitude to make decisions that take into consideration their self-interest while still satisfying their duties to the corporation. Further, the “best interests” of the corporate entity and its multitude of stakeholders are highly variable and often ill-defined, such that it would be impractical to pursue those interests as a singular goal. This Article argues that corporate officers and directors are not governed by fiduciary duties in the truest sense of the term. This misconceptualization inhibits an accurate understanding of the dynamics underlying corporate decision

Concluding that even if economists cannot agree why shareholders should have priority, they are nevertheless agreed that this is the case, the chapter goes on to examine the legal position of different stakeholders in the context of the company by referring to the thorough reform process observed in the UK some two decades ago. Noting then that, despite such a comprehensive debate, the enlightened shareholder value solution (ESV) arrived at remains controversial, and recognising that, in any case, such formal statutory provisions by no means exhaust the arrangements in place for corporate governance, the chapter goes on to look at the hugely influential development of essentially self-regulatory, best-practice based arrangements that are now a feature of stock markets throughout the world. Insofar as the experience of the jurisdiction from which this approach emerged has not been uniformly positive, the chapter proceeds to examine the alternative approach of a strict rule-based approach to corporate governance, taking the US as an example. Despite the problems associated with any alternative, these apparent limits perhaps explain the ongoing and indeed intensified interest in the notion of corporate social responsibility. The chapter goes on to seek clarity in a definition of CSR which draws a distinction between what society requires corporations to do and what it is willing to regard as optional. Noting, however, that encouraging legislators to take firm action in the face of the fear of capital flight can be difficult in the absence of some clear evidence of a problem (and even then, in some recent cases), the question is then whether the recent enthusiasm for environmental, social and governance (ESG) reporting is a reasonable way forward.