The Importance of Context: The Nature of Australian Shareholder Activism and its Regulatory Implications

Abstract

This dissertation explores Australian regulation of shareholder activism involving ASX-listed companies. The genesis of this dissertation's research lies in Australian commentary and analysis concerning activism in the years following the Global Financial Crisis. Much of that commentary and analysis adopted a cautious stance towards activism and advocated restrictive regulatory settings. Given the potential benefits of meaningful shareholder participation in corporate governance, this was a concerning development. Since apprehension about aggressive shareholder activism lay behind much of this commentary and analysis, this dissertation starts by investigating the extent and nature of aggressive activism in Australia. Notably, this research shows that aggressive activism is not prevalent in the Australian market. It reveals that Australian shareholder activism is, instead, more varied, complex and contingent than is portrayed in much recent commentary and analysis. In light of these findings, this dissertation argues that regulatory discussions need to avoid a blinkered focus on aggressive shareholder activism. Regulatory discussions instead need to be based on a clearer understanding of the different types of activism in the Australian market, their relative significance, and their respective benefits, limitations and risks from a corporate governance perspective. To illustrate the significance of these insights, this dissertation uses its research to re-appraise two important regulatory issues relating to the scope for activism under Australian law, namely: (i) whether there should be law reform to give shareholders a guaranteed right to pass resolutions giving directions or advice to company managers; and (ii) whether Australian takeover law should be relaxed to permit shareholders to leverage their governance influence by acting collectively. This dissertation highlights how the analysis of these two issues changes considerably when considered in light of the insights from this dissertation's research. This dissertation's analysis highlights the need for a textured empirical understanding to guide regulatory discussions regarding Australian shareholder activism.