Do Not Trust the Management: Shareholder Activism and Its Challenges in Malaysia
Author: Maizatul Akmal Musa
Abstract: Shareholder activism is one of the corporate governance mechanisms introduced in the process of improving corporate governance practices within companies. The aforementioned governance allows shareholders to check management behavior, safeguard their interests and reduce conflict of interests. In the course of protecting their rights via shareholder activism, there is a wide range of actions available to the shareholders, such as filing proposals, meeting with management including the board of directors, taking legal action to voice out their dissatisfactions, providing suggestions or recommendations to their investee companies.In Malaysia, as in other emerging countries in the South-East Asian region, shareholder activism is on the rise, and there has been greater recognition of corporate governance since the devastating Asian Financial Crisis (AFC 1997-1998). The companies have become more receptive to engagement and open dialogues with their shareholders. This paper focuses on the trend and factors that may impede shareholder activism as one of the corporate governance mechanisms being implemented, as an effort to reduce agency problems in Malaysia through the implementation of high-performance corporate governance practices. The cases of shareholder activism were collected through newspaper reports from 2006-to 2017. The findings of this article indicate an upward trend of shareholder activism, and surprisingly from individual shareholders. The agency and constituency theory are used to discuss shareholder activism. On the aspect of the challenges, the existing local corporate governance characteristics have been identified in the literature, they are such as political connection government influence, and specific organization policy among many others. In order for shareholder activism to be effective, it must be treated as a mechanism to improve current practices rather than as a means for shareholders to find faults or provocations.