A Good Reputation: Protection against Shareholder Activism

Abstract

Abstract:When shareholders become dissatisfied with a public company's policies or actions, they may resort to activist interventions. Shareholder activism has been described as an attempt to resolve agency conflicts by directly influencing management or board decisions. Shareholder activism may be incited by a lack of focus on shareholder value, a misalignment of corporate governance, or a number of social and environmental policy issues. Over recent years, shareholder activism has become more frequent, professional, and costly to corporations. Large, visible companies are held to be most susceptible to activist interventions, potentially damaging their corporation reputation. In this study, we analyze the effect of a good corporate reputation on the susceptibility of public companies to shareholder interventions in the form of proxy fights. We consider both the frequency and success of shareholder proposals and differentiate the effect of corporate reputation by issues context. Our findings indicate that a good corporate reputation serves as a two-fold inoculation against shareholder interventions, reducing both the frequency and success of proxy fights.

Conceptual framework for increasing legitimacy and trust of sustainability governance

“…In the late 1900s, business communities started to show interest in stakeholders and how to engage with them as firms’ reputations, success and survival increasingly became vulnerable to the influence of societal groups and movements [ 172 ]. Environmental issues, too, increased their potential to mobilize societal actors with a prominent case from the mid-1990s being Shell seeking to dump the oil rig, Brent Spar, into the sea but giving up due in part to boycotts and naming-and-shaming campaigns [ 147 ].…”

Strategic investor relations management: insights on planning and evaluation practices among German Prime Standard corporations

“…Rao and Sivakumar (1999) described IR as a boundary-spanning function that ensures support for management's strategic initiatives among financial audiences, thereby generating strategic leeway for the corporation. Similarly, Hoffmann et al (2016) argued that fostering a positive capital market reputation protects corporations from strategic interventions by shareholders. Several studies in the field of finance even have argued that good IR is of monetary value to listed corporations, as it fosters visibility and liquidity (Bushee and Miller, 2012;Kirk and Vincent, 2014) while also reducing information asymmetry and risk (Farragher et al, 1994;Chang et al, 2014).…”

Assessing Sustainability-Related Systematic Reputational Risk through Voting Results in Corporate Meetings: A Cross-Industry Analysis

“…Reputational-risk-related investigation adopts a wide set of perspectives. This study adheres to the research line that investigates the connection between reputation and shareholder activism [5]. Particularly, previous studies state that votes disclosed by shareholders in corporate meetings can be considered as a proxy for reputational harm or reputational penalties [6], that is, the negative consequences derived from reputational risk.…”

“…Given the narrow link between corporate reputational risk exposure and corporate communication strategies, it is interesting how previous research links reputation to shareholder activism [5] or, more precisely, to voting decisions, delivered by shareholders in corporate meetings, regarding managerial proposals, with voting results proposed as indirect measures of reputational pitfalls [6]. In other words, by means of analyzing the evolution of voting results in corporate meetings for a certain company during a given period, we can infer how the exposure to reputational penalties has evolved through time.…”