The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu The leading online blog in the fields of corporate governance and financial regulation. Fri, 11 Jun 2021 14:18:26 +0000 en-US hourly 1 https://wordpress.org/?v=5.7.2 Stewardship and Collective Action: The Australian Experience https://corpgov.law.harvard.edu/2020/02/18/stewardship-and-collective-action-the-australian-experience/ https://corpgov.law.harvard.edu/2020/02/18/stewardship-and-collective-action-the-australian-experience/#respond Tue, 18 Feb 2020 14:24:14 +0000 https://corpgov.law.harvard.edu/?p=126871?d=20200218092414EST Posted by Tim Bowley (Monash University) and Jennifer G. Hill (Monash University), on Tuesday, February 18, 2020
Editor's Note: Tim Bowley is a Sessional Lecturer in the Faculty of Law at Monash University and Jennifer G. Hill is Professor and Bob Baxt AO Chair in Corporate and Commercial Law in the Faculty of Law at Monash University. This post is based on a chapter in Global Shareholder Stewardship: Complexities, Challenges and Possibilities (Dionysia Katelouzou and Dan W Puchniak eds, Cambridge University Press, forthcoming). Related research from the Program on Corporate Governance includes The Agency Problems of Institutional Investors by Lucian Bebchuk, Alma Cohen, and Scott Hirst (discussed on the Forum here); Dancing with Activists by Lucian Bebchuk, Alon Brav, Wei Jiang, and Thomas Keusch (discussed on the Forum here); Index Funds and the Future of Corporate Governance: Theory, Evidence, and Policy by Lucian Bebchuk and Scott Hirst (discussed on the forum here); and The Specter of the Giant Three by Lucian Bebchuk and Scott Hirst (discussed on the Forum here).

The global financial crisis gave rise to competing narratives about shareholders and their engagement in corporate governance. According to one narrative, which was common in the United States, shareholders were complicit in the crisis, by placing pressure on corporate managers to engage in excessive risk-taking to increase profitability.

An alternative narrative prevailed in other jurisdictions, such as the United Kingdom and Australia, where the real problem was perceived to be lack of shareholder participation in corporate governance. According to this narrative, greater engagement by shareholders is a beneficial corporate governance technique.

Institutional investor stewardship codes (“stewardship codes”), which now exist in many jurisdictions, embody this second, more positive narrative regarding the role of shareholders in corporate governance. Stewardship codes reflect the growing importance of institutional investors in capital markets, and a belief that increased engagement by institutional investors can improve corporate decision-making and provide protection against inappropriate risk-taking by corporate managers.

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