In recent years shareholder groups (such as the Australian Shareholders Association) have been increasingly vocal in expressing their views on issues traditionally (and legally) reserved for board and management. Is it time for a re-balancing of the board-shareholder relationship?

Ira M. Millstein, Holly J. Gregory and Rebecca C. Grapsas of US law firm Weil, Gotshal & Manges LLP have issued a memorandum (pdf) discussing shareholder activism and encouraging increased efforts by boards of directors to engage shareholders in less contentious, more cooperative interaction and communication.

They identify board quality as a key factor in the relationship and detail 5 issues where shareholders have legitimate interests which boards need to consider:

• board composition and independent leadership,
• corporate
  performance disclosures,
• executive performance, compensation and
  succession,
• strategic direction, and
• societal concerns,
  including climate change.

They conclude:
Reaching out to shareholders in a concerted fashion will not appeal to every board. However, it is likely to be a prudent approach for companies seeking to avoid confrontation. Setting a positive and constructive tone in shareholder relations not only has the potential to elicit for the board useful insights about shareholder perspectives but also may encourage shareholders to focus on long-term performance and act as owners making rational investment decisions.