MECHANISMS OF

STOCKHOLDERS ACCOUNTABILIT

Y

Stockholders Accountability

• Corporate accountability espouses that financial performance should not be a company's only important goal and that shareholders are not the only people a company must be responsible to; stakeholders such as employees and community members also require accountability.

VOTING AND PROXY CONTEST

Proxy Contest

• -is a strategy that involves using shareholders' proxy votes to replace the existing members of a company's board of directors.

Example

$31Proxy Fight

Steps Involved in a Proxy Contest• Acquiring company and/or major

stockholders decide to join forces against the target company.• These investors threaten to use their proxy votes.

• If successful, the acquiring company can elect new BODs.

• The deal can eventually finalized.

Parties in a proxy fight

• Dissident shareholders

• Activist shareholders

• Acquiring companies

Shareholder Derivative

Action

Shareholder Derivative Action

• A lawsuit brought by the shareholders, on behalf of the corporation, against the officers and/or directors of the corporation for mismanagement or other malfeasance that caused harm to the shareholders’ interest in the corporation.

The Action Process

• After the board makes a determination, the complaining shareholder files the suit as an individual and on behalf of the corporation.

• He is then required to provide notice to all other shareholders that the action has been commenced, and must provide them the option to join the suit.

The Action Process

• The shareholder will present the corporation’s case.

• The management will respond.

Example

ABC

“Organizations need to practice qualitative corporate governance rather than quantitative governance thereby ensuring it is properly run.”-Mervyn King (Chairman: King Report)