Corporate Governance and The Internet - Will The Internet Play An Increasing Role In Corporate Governance?

By: Ian Campbell | Wed, Apr 6, 2011
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I received an e-mail a few days ago from a Stock Research Portal subscriber who obviously had spent time researching my work history and reading my daily commentaries. His e-mail dealt with the proposed Plan of Arrangement (the 'Plan') announced March 14 pursuant to which Century Mining Corp. ('Century') shareholders would exchange their shares for shares of White Tiger Gold Ltd. ('White Tiger'). About the Plan, he said: "We as minor shareholders need some credible press on this and since I have been reading your writing for a couple years, I trust you to take a real look past the surface, at the truth. Ian, its not right, its not fair and I am trying to do something about it, will you help".

Let me say from the outset:

Shortly after receiving his e-mail, I spoke directly with our Subscriber. Because he was a Subscriber I was prepared to discuss with him, based on my experience in appraisal and oppression litigation, overview conceptual issues based on my experience. To that end I suggested one thing he could do was attempt to organize like-minded Century shareholders in order to make a combined representation to the Century Board, or to any meeting called to vote on the Plan. Much to my surprise he directed me to a website, CenturyMiningBlog, which after March 14 has been used by Century shareholders unhappy with its terms as a form of 'depositary' for their shares. If you visit that Blog you will see under the tab 'Table of Dissenting Shareholders' that to date, approximately 245 Century shareholders collectively representing 79.8 million (18.8%) of the approximate 423.7 million outstanding Century common shares, purportedly have added their shares to the Dissenting Shareholders Table found on the Blog. What success, or lack thereof, these (and other Century shareholders who subsequently may join them) will have remains to be seen. I find this process interesting, and will follow it closely until the Plan:

What leaps out at me, in complete isolation from the Plan of Arrangement, is the potential power of the Internet as a vehicle that may be able to be used by:

From the point of view of company shareholders, it seems to me they could use the Internet to band together through a blog, or otherwise, in order to make representations to their company Boards and Managements to, for example:

That said, I think that for the time being at least with respect to all but the last one, these suggestions likely are more theoretical than they are practical. As a practical matter in today's environment it strikes me that in most instances where subjectivity is brought to bear by Boards in their decision making (for example with respect to management remuneration and share options) a shareholder who doesn't approve of a company's policies and practice is likely better off to simply 'vote with his/her/its feet' (i.e. sell their shares) and move on.

At the end of the day I can't imagine any company director, if asked 'whether he or she was on the side of good Corporate Governance', would say that they were not. Hence any company Board member or executive ought to be prepared to carefully consider any properly formulated shareholder views, suggestions and complaints. The trick, of course, is to find a way to ensure that shareholders do not bring poorly thought out, foolish, or misguided commentary to their Boards and Managements. Corporate Governance and responsibility cuts both ways. Just as Boards and Managements have an obligation to be responsible to their shareholders, shareholders likewise have an obligation to bring responsible points of view to their Boards and Managements. All that said, in the end the shareholders are the owners of a company, and companies spend a great deal of time and money encouraging shareholders to invest in their respective enterprises. In the end, one ought to expect a Board and Management to listen carefully to, and act responsibility on, informed shareholder suggestions and criticisms.

Notwithstanding the issue of theory versus practice, it seems to me the Internet may, over time, prove to be a meaningful vehicle for sensible, 'within the law', activist shareholders to make their views known to their Boards and Management as a contribution to good Corporate Governance.

In any event, if you are an equity shareholder in any public company, you might out of interest want to take the time to visit the CenturyMiningBlog and see how one shareholder activist group is currently utilizing the Internet.

 


 

Ian Campbell

Author: Ian Campbell

Ian R. Campbell, FCA, FCBV
Economic Straight Talk

Through the Economic Straight Talk Newsletter Ian R. Campbell shares his perspective on the world economy, the financial markets, and natural resources. A recognized business valuation authority, he founded Toronto based Campbell Valuation Partners (1976), Stock Research Portal (2007) a source of resource companies market data and analytic tools, and Economic Straight Talk (2012). The CICBV* annually funds business valuation research in his name**. Contact him at icampbell@srddi.com.
* Canadian Institute of Chartered Business Valuators
** through The Ian R. Campbell Research Initiative

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