Directing the Board

09 October 2017

Pictured above: Paul Egan, Of Counsel

"The board of directors is an amiable entity, meeting with self-approval and fraternal respect but fully subordinate to the real power of the managers. The relationship somewhat resembles that of an honorary degree recipient to a member of a university faculty.”

That’s a line from a book called The Economics of Innocent Fraud by John Kenneth Galbraith, one of the greatest economists of the 20th century, who chronicled the Great Depression and helped shaped US economic policy for decades. He wrote that book in 2004 when he was aged 96, just a couple of years after a string of corporate governance scandals in the US, starting with the infamous Enron.

Galbraith goes on to write: “At the annual meeting, shareholders are provided with information on performance, earnings, managerial intention and other matters, including many that are already known. The resemblance is to a Covenanted Baptist church service. Management authority remains unimpaired, including the setting of its own compensation in cash or stock options.”

Galbraith was entitled to be cynical about governance. After all, he had witnessed some of the most incredible financial meltdowns in history over the course of his life (he died in 2006). But there have been changes in governance since, particularly after the 2008 financial crisis, giving investors a real say in how the companies they invest in are run.

Annual general meetings can be tricky events for companies to manage. No matter how small a stake a shareholder might hold, they have the same right to question directors. It is when companies can be most vulnerable to criticism and bad publicity.

Dublin law firm Mason Hayes & Curran advises many Irish publicly-quoted firms on the rules regarding agms and company law.

For the first time, it has compiled a detailed report on how investors voted at agms this year. It focused on the big 25 firms, those with listings in Dublin and London that comply with the most up-to-date code on corporate governance.

Related Expertise

Company Law
Corporate Law
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