Shareholders Right and Corporate Governance

In recent years, the role of shareholders (institutional investors) in corporate governance has attracted attention. In Korea, the Korean version of the stewardship code enacted and announced in 2016 recommends that institutional investors exercise faithful voting rights or form a consensus with investment target companies. However, as can be seen from the characteristics of the separation of ownership and management of a stock company, it is common for the board of directors to conduct the original management, and the shareholders do not know the internal information of the company and do not have the experience or qualifications as a manager.

In addition, while the company’s social responsibility has attracted attention in recent years, claims that shareholders demand the company to solve environmental problems or social problems that are not related to the company’s interests are gradually increasing. Furthermore, the case where shareholders recently demand the realization of short-term profits contrary to the company’s long-term interests or sustainable growth cannot be ignored. In order to realize effective governance in this situation, it is necessary to review the extent to which shareholders should be involved in the company.

There seems to be little discussion on this issue, perhaps because the Korean version of the stewardship code has been introduced as part of the government’s growth strategy in relation to governance, and institutional investors are encouraged to be involved in corporate governance. To get implications for this issue, this paper looks at shareholder rights in corporate governance in the United States. In the United States, it has shown a trend of placing importance on the discretion of managers while basically limiting the rights of shareholders.

In response, a claim has been raised that shareholders’ rights should be strengthened, and discussions over strengthening shareholders’ rights have been held until recently. Therefore, it is considered meaningful to examine the content, characteristics, changes, and latest situation of the US shareholder rights legislation, and to consider why shareholders’ rights have been limited or the discussions surrounding the restrictions. However, since the scope of the review is not narrow, this paper is limited to the exercise of voting rights on the approval of shareholders’ rights, which are particularly important in corporate governance, such as the right to propose shareholders, the right to appoint directors and nominate candidates (right to propose candidates), and the remuneration of executives.