Question

Critically assess whether shareholders should be given more rights and powers to control the company.

Answer guidance

This question covers the internal dynamics of the company, the mechanisms for control, and the rules for corporate governance. 

To provide a basis for your discussion you should explain and assess the current position – what rights and powers shareholders have.  Look at the separation of management and ownership, and consider voting rights, meetings, inspection, appointment/removal of directors etc – and evaluate the level of control shareholders have. Don’t ignore the ‘soft law’ of the UK Corporate Governance Code, focusing on how and to whom it applies, and considering whether this provides any ‘power’ to shareholders. You could consider the position of institutional investors and the Stewardship Code. Consider whether the current position – the level of rights and powers given to shareholders - is a problem or not, exploring why shareholders should or should not have more powers, looking both at theoretical writings and practical examples.

The question requires you to consider explicitly whether more rights and powers should be given to shareholders. So consider what reform, if any, might be appropriate and why – and whether this should be reform to the law, reform to the Codes, or something else. Should it reduce or increase regulation on companies? You could think about how best to balance the positions of shareholders and management, what role law should properly play in governing individual company structures and arrangements, and who needs protection and why.