Boardroom Risk & Reputation

Businesses that overlook shareholder risk expose themselves to business disruptions, reputational harm, and potential legal liabilities for both the business and its directors.

The support of shareholders is indispensable for the success of public companies. However, companies also encounter a spectrum of risks emanating from their shareholders, ranging from activist shareholders advocating various, sometimes conflicting, agendas within the business to shareholders seeking redress for losses stemming from declines in share prices.

Both institutional and individual investors are increasingly leveraging activism to drive changes in corporate governance practices, address social or political issues, or challenge executive compensation. Shareholder engagement, proposals, and 'vote no' campaigns are on the rise globally, presenting the potential to disrupt businesses and tarnish corporate reputations, depending on the issue, mode of engagement, or outcome.

Shareholder litigation against companies is experiencing an upward trend. While securities litigation claims have long been prevalent in the US market, other jurisdictions worldwide are streamlining processes for bringing such claims against companies and their directors. The proliferation of the global litigation funding market, coupled with the availability of "after the event" insurance, empowers shareholders to initiate class or group litigation without assuming the costs or risks of claims. In cases where shareholders are funds with duties to their stakeholders, the allure of participating in such claims is even more compelling.