Shareholder engagement is pivotal in corporate governance, evolving beyond formal resolutions to impact business decisions. This chapter unveils the typically undisclosed dynamics of board-shareholder engagement through a survey of 171 SEC-registered corporations, targeting corporate secretaries, general counsel, and investor relations officers. The survey was complemented by a review of the disclosure on shareholder voting and engagement included in proxy statements filed by Russell 3000 companies during the 2018–2022 meeting seasons. Larger and mid-sized companies more frequently engage than smaller organizations. Engagement, often with major asset managers, can take a confrontational turn, particularly with hedge funds at smaller firms. Topics include executive incentive plans, ESG metrics, GHG emission reduction, workforce diversity, pay equity, and political spending. The study reveals that engagement significantly influences corporate practices, leading to changes, withdrawal of proposals, alterations in proxy votes, and the inclusion of engaged shareholder-nominated directors in management slates.

Beyond voting, shareholders can participate in corporate governance through shareholder proposals, proxy contests, and takeovers. The evidence shows little to no benefit to firm performance or corporate governance over the long term following shareholder proposals and proxy contests. Takeovers suffer from similar failings in that there is no evidence they are actually about controlling agency costs or that the target company’s performance improves following acquisition. In fact, takeover defenses appear to be associated with better corporate outcomes.

Does agency cost theory work in the real world? The various hypotheses drawn from agency cost theory are considered in light of the relevant empirical evidence. Agency cost theory appears to be able to explain almost anything, but it predicts nothing.

This chapter addresses the voting and other engagement practices in the 19 jurisdictions in this Handbook on Shareholder Engagement and Voting. First, it is shown that shareholder participation in AGMs differs significantly between countries, which is related to differences in ownership structures, ownership concentration, the powers of the general meeting of shareholders and the other means shareholders have for voicing their interests. Similarly, the powers of the general meeting of shareholders differ substantially between the different countries. Common shareholder voting items are relatively few but include some kind of vote on board nominees and some say over pay although in some countries compensation is an exclusive business of the board of directors. Shareholder proposals seem to be more common in common law countries where it is relatively easy to table a proposal. Questioning the board at general meetings is a widespread practice of especially small shareholders, contrary to many other shareholder engagement techniques commonly used by (institutional) investors. The wide diversity of engagement practices shows that an optimal and efficient division of powers between shareholders and board has not yet been found.

The Korean government has been reinforcing laws and regulations to improve transparency in the investment structures of large business groups as well as their corporate management, in an effort to strengthen shareholders’ rights in individual companies. In this changing landscape of regulatory environment and capital market, the notion of maintaining effective communication and constructive relationships with domestic and foreign shareholders, including institutional and private investors in the capital market, is gaining importance. Shareholder engagement has gained traction in Korea. Institutional investors have become more active, and listed companies have started to proactively adopt shareholder-friendly policies, seeking to improve corporate governance. The Korea Stewardship Code seems to have played an important part. Institutional investors adopting the Code have demonstrated greater willingness to communicate and engage with their investee companies and to bring about changes in corporate governance. This has in turn helped to enhance shareholder value, as some empirical evidence suggests.

This chapter provides an overview of the main findings of the 19 jurisdictions that are studied in the Handbook on Shareholder Engagement and Voting. The chapter describes the different legal means available for shareholders to engage with their companies, and outlines both the procedural requirements for general meetings and the material shareholder rights in a comparative perspective. Partly due to global capital markets and the rise of institutional ownership, this chapter shows important similarities in shareholder control rights and convergence between jurisdictions. An important example of such convergence are say-on-pay rights: in virtually all jurisdictions, shareholders have some sort of say-on-pay to date. Yet, this chapter also shows that important differences remain, also marked by the large variety of advisory and binding say-on-pay rights. Clearly, the although the legal infrastructure is a very important factor for the practice of shareholder rights, domestic factors often play a major role, even in today’s globalized markets.