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« On becoming an «activist board»… In the age of activist shareholders »

Yvan Allaire, Mihaela Firsirotu et François Dauphin

« After some 15 years of tweaking and polishing the theory and practice of “good” governance, perfectly independent board members remain surprise-prone, estranged from the goings-on in the company, partially informed and lacking the wherewithal to challenge management. No doubt that the legitimacy and credibility of boards have suffered as a result.

In the current age, institutional shareholders have all become “activist” investors. Some funds make it their mission to push aggressively on boards of directors to implement measures that they (the activists) deem likely to boost stock prices. Other funds may be less vocal and less aggressive but will support the “activist” funds as well as put forth their own expectations in private meetings with management and the boards.

Boards will have to raise their game, move to a value-creating sort of governance. Corporate boards of the future will have to also become “activists” in their quest for information, their willingness to stand up to short-term pressures and their ability to question management’s strategies, compensation and performances.

This book proposes a “revolutionary” form of governance building on some of the steps taken by the more thoughtful boards: more involvement in strategy making, creation of ad hoc committees, more substantive training for board members and their extensive exposure to all facets of the business, independently sourced information transmitted to board members, etc. But that does not suffice, as this book demonstrates.

Getting to a more effective form of governance will call upon unusual, even controversial, measures by boards. It will also require institutional investors to change a number of their policies and practices and for governments to level the playing field.

This book makes, we believe, a forceful case for a different kind of governance system capable of delivering long-term value to all stakeholders and to society at large. »