Shareholders are the true owners of the company, so they have lots of rights. For a start, in theory, they appoint both the board of directors and the auditors. In practice, the directors do both and shareholders have all too often supinely agreed to everything done in their name. Even great institutional holders who know the law and accounting principles and are sophisticated investors have been lax in exerting their power and have generally more often sold the shares than spoken up or done anything for the business. This has been changing: some institutions are using their influence and it is becoming less easy for the board to dismiss awkward questions at the annual meeting, but still, too many private individuals consider any questioning of the board as an unseemly delay of their free drinks.
As owners, shareholders are entitled to be given a wide range of information and to participate in the company’s success.
At the meeting, they are called on to approve the accounts by voting, can ask questions, and have a vote on a number of other resolutions including the reappointment of auditors and directors. Most shareholders neglect this privilege, either throwing away the voting card altogether or just sending back the enclosed proxy form giving the chairman carte blanche to vote on their behalf.
The decision is made even more complicated if the offer is wholly or in part in the form of the bidder’s shares. The choice is then cluttered with other considerations such as whether one wants those shares, whether the valuation of the buyer’s equity is fair or realistic, and whether selling might crystallize an unwelcome capital gains tax liability.
