Page 1

8 of 182 DOCUMENTS 2003 LexisNexis Asia (a division of Reed Elsevier (S) Pte Ltd) The Malayan Law Journal Articles 2003 Volume 1 [2003] 1 MLJ cxlviii; [2003] 1 MLJA 148 LENGTH: 8553 words TITLE: Article: Encouraging Shareholders' Participation In Company Decision-making: A Reflection On Existing Law And Reform Issues AUTHOR: Aiman Nariman Bt Mohd Sulaiman Asst Prof, Dr, LLB (Hon), MCL (IIUM), SJD (Bond), Private Law Department, Ahmad Ibrahim Kulliyyah of Laws, International Islamic University Malaysia TEXT: The mechanism for shareholders' involvement and its constraints It has been argued that the complex problem of corporate governance requires, amongst others, the revival of shareholders' involvement in corporate decision-making. Numerous reports and codes on corporate governance emphasized the importance of shareholders' involvement via enhancing rules concerning company's meetings and providing guidelines for more effective communication among corporate shareholders. Nowhere is shareholders' activism more clearly seen as in the exercise of voting power. The Malaysian Code on Corporate Governance highlights the importance and relevance of shareholders' involvement in company decision-making and approaches the discussion by focusing on shareholders' involvement in the voting process as well as insisting on enhanced communications between investors and the board of directors. The MCCG recommends that institutional investors make 'considered use of their votes'. The following discussion details the mechanism of shareholders involvement via the exercise of their voting rights and its constraints. As part of an interconnecting web of mechanism for corporate governance, shareholders' activism is often seen as idealistic. Critics argue that shareholders are passive and even given a facilitative regulatory structure; shareholders will seldom exercise voice and are more willing to sell their shares. One of the reasons attributed to shareholders' passivity is the separation between ownership and control. The Berle and Means theory that modern corporations operate on the basis of separation of ownership and control continues to be true and relevant in certain jurisdictions where corporate regulation is concerned. However, in some jurisdictions like East Asia, for example, companies are often controlled directly or indirectly by the majority or substantial shareholder. n1 It would have been thought that in these jurisdictions, passivity is a non-issue because now those who own the company also control it. Nonetheless, a different problem arose. Potential for self-dealing and oppression of minority interests abound due to the majority shareholders acting in their own interests at the expense of the minority shareholders. The focus given to institutional shareholders also adds a new dimension to shareholders activism. For example, selling the shares may not be a profitable or possible option especially for institutional shareholders, thus

Page 2 The Malayan Law Journal Articles

creating necessity for shareholders to exercise voice over the right to exit. n2 Hence, as shareholders' activism may no longer be an option but a necessity, a more facilitative regulatory structure is needed to clarify what are actions that shareholders can take to regain control over corporations. If shareholders activism is to be made a reality, then the existing legal and regulatory environment needs to be reconsidered by identifying and creating avenues for shareholders' activism.

Proxy voting: Form and substance A very pertinent issue concerning voting rights is a member's right to attend and vote at company meetings personally or by proxy. One issue that has been highlighted in relation to proxy is the persons who can be appointed as proxy. n3 More recently, however, proxy appointment has been questioned in relation to the use of the proper proxy form for appointment. n4 Allegations of improper rejection of proxy and proxy form have also been raised with corollary arguments on the oppressive conduct of company directors. Many problems can arise out of proxy voting in company meetings. Where the Companies Act 1965 is concerned, no provision exists either in the Companies Act 1965 or Table A on the way the proxy should vote or the validity of a proxy vote cast not in accordance with the instruction of the member. Contrast this with s 250A (4)(c) of the Australian Corporations Act 2001, which states that a proxy may be given instruction on voting and if he votes by a poll, the proxy must vote that way. However, a proxy under this subsection need not vote on a show of hands but if he does vote, he must vote in accordance with the instruction. Nonetheless, the Australian Corporations Act only imposes an obligation on the proxy to vote in accordance with the member's instruction but does not deal with the effect of not doing so. In both jurisdictions, the proxy has an obligation to vote in accordance with the member's instruction n5 and the terms of appointment will determine the authority of the proxy to vote the member's shares. n6 The validity of the votes cast by the proxy is related to the instruction given by the member to the proxy. However, more importantly, it has been decided that the member's remedy is to be decided between the member and the proxy. n7 It is up to the member to prove that he had given an express instruction to the proxy, which was not followed or specified in the proxy form. n8 The US Model Business Corporations Act on the other hand requires the company to tabulate the votes of the proxy according to the instruction given. n9 Consider the facts of Tong Keng Meng v Inno-pacific Holdings Ltd & Anor. n10 This case highlights the importance of using the proper proxy form. The company, Inno-pacific Holdings Ltd, convened an EGM to be held on 7 August 2001. Mr. Tong, the director who was being removed, was also a shareholder of the company. He did not attend the EGM and took the action claiming that there was oppressive conduct by the passing of these resolutions. He argued that one of the members' instruction to her proxy to vote against these resolutions had not been followed. Since the instruction was not followed, he argued that there was unfair conduct by the company. He brought the action under the oppression provision of the Singapore Companies Act. He argued that the votes cast by Ms Quah did not follow the instruction of the appointor. Because of this, the wishes of the majority shareholders were not followed and this amounted to oppressive conduct by the company. The member, Ms Teo, had appointed Ms Quah as her proxy following a proxy solicitation exercise by Ms Quah. Ms Teo had given instruction in the proxy form for the proxy to vote against the resolutions. Ms Quah, however, did not follow the instruction and voted for the resolutions. If Ms Quah had followed Ms Teo's instruction and voted against the resolutions, the resolutions could not have been passed and would have failed. The company argued that the votes cast by Ms Quah should be treated as spoiled votes. If the votes were treated as spoiled votes, the result was that the resolutions would have been passed. Mr Tong argued that Ms Quah was obliged to vote according to the instruction given by Ms Teo and that the votes cast should be treated as per the instruction. n11 In its decision, the court emphasized the utility of the proxy form. Where the proxy form is a two-way proxy form and instruction is given in the proxy form of the way the votes should be cast, the votes cast by the proxy which are against the instruction as stated on the proxy form constitute spoiled votes. The current limitation on proxy voting on a show of hands also discourages shareholders' involvement. Although

Page 3 The Malayan Law Journal Articles

the Companies Act 1965 allows a proxy to vote, this is only if voting is by poll or if the company's Articles of Association allows a proxy to vote by show of hands as well as on a poll. The KLSE LR has made it mandatory for Articles of listed companies to allow for a proxy to vote by show of hands as well. This should be made applicable for public as well as private companies. The reason for not allowing a proxy to vote by show of hands could be related to the rule that a member may appoint more than one proxy, and if this happens, it is illogical for both the proxies to vote. This can be resolved by specifying that if there is more than one proxy appointed and the voting is by a show of hands, then the proxy cannot vote. n12 This is not to say that there is no statutory provision that can assist shareholders in voicing out their concerns. For example, shareholders can rely on ss 144 and 145, although the former is not a favored option as the cost of calling for the meeting is borne by the shareholders themselves whilst the latter has cumbersome procedural obstacles for shareholders. Nonetheless, shareholders can piggyback on the existing management agenda by relying on s 151. However, the section has been said to tip the balance in favor of management. n13 This is due to, amongst others, the restriction on the length of any materials that may be circulated by shareholders under this section, the ability of the management to utilize the company's funds for making any replies to the circular and the procedural requirements that need to be complied with by the shareholders such as: (a) depositing a copy of the requisition which is signed by all requisitionists at the registered office; (b) depositing the copy within a time frame (not less than six weeks/one week before the meeting); and (c) depositing a sum reasonably sufficient to cover the company's costs in complying with the requisition. The section also requires that the matter for which request for circulation is made be one that may properly be moved at that meeting. The company is also given the right to apply to court not to circulate any statement if the court is satisfied that the section will be used to secure needless publicity for defamatory matter. n14 Article 73 of Table A is relevant to consider what are matters which are properly within the shareholders' power to consider and this usually depends on the interpretation of the ordinary business of a company. n15 This provision requires judicial support so as to enable it to be utilized fully by shareholders for their voices to be heard. n16 In addition, there are arguments of biasness in that the expenses to solicit for proxy are borne by the company, n17 whereas shareholders will have to bear their own costs. In the US, for example, the decision to circulate proxy materials at the company's expense is subject to the business judgment rule where directors may decide in good faith that the policy which is being supported by the board and for which proxy is being solicited is in the best interest of the company, n18 thus justifying the company having to bear the management's proxy solicitation efforts. In contrast, in Australia it has been decided that directors cannot use the company's funds to support or oppose candidates for election to the board. n19 Under s 149(3) of the Malaysian Companies Act 1965, any person who authorizes or permits an invitation to appoint as proxy a person or one of a number of persons specified in the invitation to be issued at the company's expense to only some of the members entitled to be sent a notice of the meeting and to vote thereat by proxy shall be guilty of an offence against the Act. This section does not restrict the use of the company's funds for soliciting for proxy. It only states that the person authorizing or permitting the company's funds to be used for solicitation of proxy must ensure that the solicitation is sent to all members. Since the decision on how the company's funds are to be utilized in the company's ordinary course of business is within board's authority, this section actually assists managers to fund their proxy solicitation. Nonetheless, Prof Cox stated that changing the existing rules for proxy contest expenses might lead to undesirable self-dealing transactions by the incumbent to recoup the cost of securing their position. n20 The locus standi required for the use of s 151 also merits discussion. n21 The section requires that the requisition be made by members representing not less than 5% of the total voting rights of all members. Alternatively, members constituting not less than 100 members holding shares in the company which has been paid, on average, not less than RM500 can rely on s 151. The minimum shareholding threshold reflects a need to balance shareholder suffrage while not trivializing the voting process. Quoting Professor Banard; An ownership requirement this low (a minimum ownership requirement of $1000 or 1% of market value, whichever is less) would freely grant access to the ballot to many shareholders with minuscule holdings, thus trivializing the nominating process ... A workable access rule should set the threshold ownership requirement much higher that is

Page 4 The Malayan Law Journal Articles

appropriate for shareholder proposals, in the range of $1 million to $5 million or to 3 to 5% of the outstanding voting shares, whichever is less. n22 The appropriateness of the Malaysian provision has not been tested through empirical research as to the correlation between ownership and control of public companies in Malaysia. Since individual shareholders who are not part of the board and/or management will seldom own this many shares in a company, the section does not assist minority shareholders' activism. This is because Malaysian companies, as with most Asian countries, do not usually abide by the separation of ownership from control, since the substantial shareholder usually controls the company via involvement in the board and/or management. However, this setback is compensated to a certain extent by the focus on institutional shareholders. Although evidence in other jurisdictions indicates that institutional shareholders seldom own more than 3-5% of the shareholding in a company, there is incentive for institutional shareholders as a group to be active monitors. n23

Authentication issues An important issue in proxy form lodgment is to determine the authenticity of proxy appointment. This is often left to the company's Articles of Association. Consider the difficulties and problems that can arise in relation to a proxy form that could not be authenticated - the effect of proxy-voting in any resolution passed by the company; the cost that has to be incurred for reconvening a meeting; and the problems that may have to be resolved in court on substantive issues relating to the validity of the meeting itself. For example, the Board of Tai Wah Garment Manufacturing Bhd had convened the company's AGM. Subsequently, the Board passed a resolution at an emergency board meeting to postpone the AGM due to, among others, the difficulty of verifying 470 proxy forms in favor of two new nominee directors whose nomination was due to be voted on at the upcoming AGM. The forms could not be verified on time since they were received two days prior to the meeting. The Board had received a proposal for the nomination of four new directors but had only accepted the nomination of these two nominees. The shareholders of the company nonetheless proceeded with the meeting. n24 It is arguable that a company may be allowed to adjourn a meeting when the authenticity of the appointment of proxies is questionable. However, whether or not a company may postpone a meeting without first holding the meeting at the scheduled time, date and place will depend on the company's Articles of Association as well as any order of the court if the company decides to seek court order in relation to the meeting. n25 Of course, the company has the option of rejecting proxy forms that are suspect although the company directors will have to understand the risk of any oppression action taken against them for any allegation of wrongfully rejecting a valid and authentic proxy. Table A of the Companies Act 1965 nonetheless provides that the qualification of any voter shall be decided at the meeting at which the vote is given and the Chairman's decision shall be final and conclusive. With developments in information and communications technology, reform to allow electronic meetings and electronic voting are under way in other jurisdictions. n26 This matter has to be dealt with by the company's articles of association since there is no statutory provision in the Companies Act 1965 that allows the use of electronic means of voting by members. n27 The technology may be new but the concerns regarding the authenticity of the appointment of proxy are not. If voting electronically is allowed, then authentication issues need to be considered. The Malaysian Digital Signature Act and how banks in their e-banking and e-commerce services deal with authentication issues should be considered to be adapted to electronic voting. In more advanced jurisdictions, the United States for example, a new form of service has been utilized where members may be able to communicate their votes in telegraphic or 'datagram' forms. The solicitation for proxy is handled by a service-provider that contacts all the members of the company and provides them with a toll-free number that they could call to register their votes. In one case for example, once the members call this number, the operators will ask the caller a series of questions to determine the identity of the caller, the instruction for the vote and the number of shares to be voted. The petitioners successfully challenged this service because it lacked the procedure for verifying the identity of the caller and the genuineness of the proxy instruction. n28

Page 5 The Malayan Law Journal Articles

The court stated that the presence of a signature on the proxy form, in writing or by signature stamp or facsimile, is a presumption of the proxy having originated from the member. However, the above methods are not the only means of indicating authenticity. What is important is that there must be some 'identifying mark that would justify treating the proxies as presumptively valid'. n29 Where institutional shareholders are concerned, research showed that institutional shareholders seldom vote due to the archaic method of proxy form lodgment, the difficulty of establishing audit trails as well as the limited time given for institutional shareholders who may have to obtain the unit holders' instructions prior to exercising any voting in the companies they invest in. n30 The availability of electronic voting will assist the institutional shareholders' involvement in voting, especially if they are obliged to exercise their votes in companies they invest in for certain proposals only after obtaining their unit holders' mandate. n31

Regulating proxy solicitation Most companies' Articles of Association specify that the proxy form shall be submitted not less than 48 hours before the meeting. The effect of this rule is that any variation in the instruction cannot be made by a change in the proxy form that has been lodged with the company if the time frame has lapsed. If a member decides to retract the proxy form already submitted so as to change the instruction contained in it, the company has a right to refuse to accept the amended proxy form if it was submitted less than 48 hours before the meeting. Although the provision creates efficacy and certainty in proxy voting by allowing the company to verify whether or not the proxy has been duly appointed in accordance with the Articles so that the voting at the meeting can be carried out efficiently and correctly, this provision works in favor of the company's management. In some jurisdictions, advance notice by the management of the proxy instruction has led to the management resoliciting proxy prior to meetings. n32 This situation has raised views for confidentiality of proxy voting so that the management will not be able to access the voting instruction prior to the voting process. n33 On the other hand, some jurisdictions have decided to make obligatory a record of proxy voting in the minutes of meeting. n34 Proxy solicitation is not extensively regulated by the Companies Act 1965 or the KLSE LR. The extent of regulation over proxy solicitation is very briefly made through the Malaysian Companies Act 1965. Under s 149(5) of the Malaysian Companies Act 1965, the proxy solicitation must be accompanied by a proxy form which shall entitle the member to direct the proxy to vote either for or against the resolution. Notice of meetings must also state prominently that a member may appoint a proxy. n35 Nonetheless, the person soliciting for the proxy can specify that he wishes to solicit for votes cast in a particular manner. n36 The Malaysian statutory provisions do not regulate the content of the proxy materials. Whether this should be done requires a deliberation of two opposing effects of extensive proxy solicitation rules in the United States. The detailed provisions of the US proxy solicitation contents have been said to be able to minimize the management's control over the proxy process, as it requires the management to circulate relevant materials and disclose information to shareholders for their perusal in relation to the subject matter of the proxy solicitation exercise. On the other hand, it has also been said to reduce the incentives for shareholders, especially institutional shareholders, and reduce concentrated effort in obtaining a proxy due to the expansive definition of solicitation and the fear of violating securities law. n37 A reason for the US federal proxy rules being viewed as an obstacle to shareholders' involvement is the exclusion of an officer election proposal in the proxy solicitation process. One reason why this rule needs to be removed is that affording shareholders the opportunity to elect directors will realign the directors' interests with that of shareholders. n38 However, directors' nomination is an issue which s 151 of the Malaysian Companies Act 1965 has a clear

Page 6 The Malayan Law Journal Articles

advantage over that of the SEC federal proxy rules. Malaysian shareholders could not be constrained by s 151 from engaging in soliciting for proxy in relation to directors' nomination since the section does not exclude directors' nomination form being raised under s 151. At common law, shareholders have the power to elect directors and this power should be construed to include nominating directors for election. The nomination process, however, has to follow procedures specified by the Companies Act 1965 or the company's Articles of Association. The difficulty of doing so has been discussed earlier in relation to s 151 especially where the management controls the meeting agenda. Another problem once faced by the US institutional shareholders is in relation to filing requirements. Nonetheless, the SEC rules have been changed to allow institutional shareholders communication without filing the required information and documents with the SEC if the communication is not to seek proxy authority from other shareholders. Shareholders are also now allowed to publicize their views through the media without having to comply with the filing requirement, provided the publication does not request for proxy authorization. n39 These are the issues that need to be considered if there is to be regulation of proxy solicitation.

Available remedies and judicial oversight It is unclear what the effect of non-compliance with the proxy solicitation provisions would be on the meeting. Arguably, the remedy is under s 181 for oppression. However, in Tong Keng Meng v Inno-pacific Holdings Ltd & Anor, n40 the court decided that there was no oppression or unfair discrimination by a member soliciting for proxy. The whole purpose of proxy solicitation is to garner support and this is a legitimate exercise of voting power. The decision in this case was based on the absence of conduct that is oppressive, unfairly prejudicial or unfairly discriminatory. There was no proof of deliberate non-compliance by the proxy with the member's instruction. Nonetheless, it may be possible to argue that there was oppressive conduct/unfairly discriminatory conduct by the directors in rejecting the proxy form on technicalities whilst allowing other proxies that are defective due to the same technicalities to be accepted. It must be noted, however, that proxy appointment and lodgment of proxy form is entirely technical and whether or not the company can reject the proxy must be based on good reasons, for example, non-compliance with the proper way of filling the proxy form. This is usually provided in the company's Articles of Association. The need for compliance with the proxy provisions in the articles of association (as well as any other provisions concerning the internal management of a company) goes towards maintaining a standard of compliance with the internal management rules of a company. n41 Would a member be allowed to get an order for reconvening a meeting? The issue is unclear, unlike in the US where proxy solicitation is governed by the Securities Exchange Act and non-compliance with the rules concerning disclosure and reporting obligations with the SEC will constitute a ground for injunction against using the proxy and holding the meeting until the proxy is resolicited. Nonetheless, considering that directors do owe fiduciary duties to members to furnish them with relevant information to be considered at company meetings, there may be liability for breach of duty to exercise power for a proper purpose, especially if the matter to be decided is one that has elements of directors' conflict of interests, for example, directors' re-election. n42 In addition, judicial oversight has occurred in the past over directors' decision to postpone general meetings to further their own interest. n43 In Australia, the failure of a chairman to vote when he has been appointed as a proxy was found to be a breach of directors' fiduciary duty and of corporations law. This was due to the fact that there was an express statutory provision mandating the chairman to vote if he was appointed proxy. n44 This failure resulted in a civil penalty provision under s 1317E(1)(a), which provides for an order that the person must pay a pecuniary penalty. At common law, the appropriate remedy for the member is to be decided between the member and the proxy. Before any relief is given, the relationship between the member and the proxy must be clearly identified. A member may be able to obtain relief against the proxy if: (a) There is a contract between the member and proxy. A contract here means that the proxy's appointment is not gratuitous or the proxy is given consideration (financial incentives, remuneration or payment etc) to vote. The proxy's right to attend and vote at the meeting is similar to that of a member. If a member cannot be compelled to attend and

Page 7 The Malayan Law Journal Articles

vote at a meeting (subject to a court-ordered meeting), a cannot be compelled by the company to attend and vote. However, the member may apply for mandatory injunction that the proxy do attend and vote. (b) There is a fiduciary relationship between member and proxy. A fiduciary relationship is a relationship where there is trust and confidence between persons. For example, if the proxy is a lawyer for the member or if the proxy is a trustee for the member or a director of the company.

Institutional shareholders' 'considered use' of voting power In line with the important role that institutional shareholders have in monitoring corporate (mis)conduct n45 due to, among others, the increase in funds controlled by institutional shareholders, n46 suggestions have been made to regulate voting by institutional shareholders. One area is mandatory voting by institutional shareholders. n47 However, mandatory voting has not received a favorable response from institutional shareholders. n48 Research in different jurisdictions, namely Australia and the United Kingdom, showed different results on surveys done in relation to institutional shareholders voting. In Australia, quite a few institutional investors do not vote at all or only vote in routine matters. n49 What constitutes routine issues differ from one institutional shareholder to another. n50 In the UK, research undertaken by the National Association of Pension Funds (NAPF) in 1991 showed that only 20% of institutional shareholders voted, but the NAPF survey in 2000 indicated that institutional shareholders are voting 60% of their shareholding. n51 This increase in institutional shareholders' voting is attributed to the NAPF taking a proactive role by issuing its guidelines for the exercise of voting rights by institutional shareholders. This voluntary step is a reaction against the proposal for mandatory voting. To circumvent being required by law to vote, the industry response was to rely on non-legal rules. n52 In Malaysia, the institutional shareholders' role is provided for by the MCCG. The MCCG recommends that institutional shareholders make considered use of their voting power, although absenteeism from voting is always an option. The MCCG, however, only identified the election of non-executive directors and board composition as matters where institutional shareholders should exercise their voting powers. n53 Furthermore, Malaysia goes one step further by making it compulsory for unit trust funds to obtain the unit holders' consent for the election of directors on the investee companies. The Malaysian Securities Commission Guidelines on Unit Trust Funds, cl 13.1.3 and para 3(c) of the Practice Note 11 states that a management company or trustee shall not exercise the right to vote in respect of shares forming part of the investment of a unit trust scheme which is held by the trustee at any election for the appointment of any directors of a corporation whose shares are so held, unless the exercise of a voting right at the next general meeting of the company is authorized by the unit holders of the scheme by way of a resolution of the majority of all unit holders voting at the unit holders' meeting summoned for that purpose. The Securities Commission is in the midst of preparing new guidelines on this issue. n54 Some of the suggestions included the proposal to establish a voting policy and a disclosure of the policy in the unit trust prospectus and annual reports, set a criteria for nominee directors representing the unit trust in investee companies, the requirement that a board nominee should be independent of the unit trust company's management and is not a trustee as well as ensuring that the nominee be appointed as an independent non-executive director of the investee company. The consultation paper also suggested that unit trusts establish their voting policy on issues involving conflicts of interest and effective communication with unit holders. The Securities Commission's project content echoes that of the OECD Principles on Corporate Governance, as well as many other institutional shareholders' reform proposals in other jurisdictions. The OECD Principles relied on disclosure to shareholders as a means of enhancing institutional shareholders' involvement in corporate governance in investee companies. Nonetheless, the OECD guidelines still abide by the belief that the custodian should be given discretion in voting. Thus, the OECD guidelines state that if no instruction to the contrary is received, the custodian will vote the shares in a manner he deems to be consistent with the shareholders' interests. CALPERS, for example, has its

Page 8 The Malayan Law Journal Articles

own guidelines for seeking corporate representation in investee companies. n55 The NAPF also made the same suggestion in favor of disclosure of voting policy when the idea for mandatory voting by institutional shareholders was mooted. The Myners Report of 2001 in the UK has also adopted a Cadbury-style approach by proposing that institutional investors issue or disclose their voting policies. n56 Where institutional shareholders are concerned, voting is done either by the trustee or the corporate manager and it is trite law that voting is a fiduciary duty. Although it is understood that sometimes policy requires unit holders' interest to be protected through the requirement that the custodians vote only after obtaining the unit holders' instruction, this may prove to be a disincentive to institutional shareholders' involvement in the corporate board selection process. The dichotomy of unit holders' protection and institutional involvement in corporate governance arose because of the divergent legal rules of the law of trust (governing the relationship between the participants in the unit trust scheme) and company law (governing the relationship between the trustee of the unit trust scheme with the investee companies). n57 Where company law is concerned, the trustee company is the legal and registered owner of the shares and exercises all the corollary rights of share ownership, including the right to vote at the company's meetings. Ramsay, Stapledon and Fong n58 found that one of the more significant legal barriers in Australia for institutional shareholders' involvement was the restriction on voting by unit trust managers. n59 The OECD principles n60 stated that in relation to voting by custodians or nominees which is usually done in a manner agreed upon by the beneficial owner of the shares, OECD countries are seeing a trend where custodian institutions provide their shareholders with information concerning their options in the use of their voting rights. The OECD Principles go on to suggest that a balance must be drawn between the shareholders' interests and the need not to impose excessive burdens on custodians to obtain shareholders' approval. A more suitable rule is to rely on the disclosure obligation of voting policy and actual voting by institutional shareholders. n61

Cumulative voting Another proposal raised by the Malaysian Finance Committee on corporate governance is cumulative voting. n62 Cumulative voting occurs in relation to board appointments. In a cumulative voting, each member has for each share a number of votes equal to the number of directors being elected. Instead of 'one vote; one share', the member is given additional voting power based on the number of nominees to the board. The member can allocate these votes to any of the candidates as the member chooses. The Malaysian Finance Committee on Corporate Governance cited the US as a model for cumulative voting. The use of cumulative voting in US has gone through its popularity stage, an impasse and more recently a revival in terms of its popularity and relevance to institutional shareholders. n63 Since most institutional investors who have voting guidelines identify the board composition as an agenda for their institutional involvement, n64 cumulative voting will enable the institutions to determine the quality, independence and accountability of board. n65 One of the criticisms against cumulative voting is its potential use by a minority to control the majority. However, the institutional shareholders' role in corporate governance, particularly in shareholders' activism, minimizes this risk. If cumulative voting is accepted, the concentrated monitoring by institutional shareholders amongst themselves will benefit other shareholders and reduce the possibility of cumulative voting being used by a minority group in a company. n66 Management has also raised the point that cumulative voting will allow the board to promote the interests of a minority constituency in the company, whereas the board of directors are obliged to act on behalf of the company as a whole. n67 However, cumulative voting should be reconsidered because the issue is no longer between the minority versus the majority but a trade-off between minority and management. n68 Furthermore, directors are duty-bound to act in the best interests of the company as a whole and not any group that nominates them. This argument may be used as a controlling factor against directors acting in the interests of a minority. In countries like Malaysia, where the majority shareholders are almost always on the board of directors, cumulative voting may enable a minority group to be represented on the board. This shows that cumulative voting can be used as a method of aligning shareholders and

Page 9 The Malayan Law Journal Articles

management's interest. In addition, cumulative voting enabling a director to be appointed by a minority will only add to corporate governance because there will be a break of management control over the board by the inclusion of an independent voice. n69 Where cumulative voting is concerned, one section that needs to be considered for reform is s 55 of the Companies Act 1965 that allows only one vote for one share in public companies as well as the KLSE Listing Requirement that abide by the 'one share, one vote' policy. A policy decision will have to be made in relation to the decision to make any such proposal mandatory or permissive in nature. In addition, cumulative voting, if introduced into Malaysian company law, is only as good as the minority shareholders who use it to ensure sufficient board diversity and independence.

Conclusion The above are accounts of current concerns to facilitate shareholder's involvement in corporate governance. The discussion highlights the current actual and perceived legal constraints in relation to the exercise of voting by shareholders, both individual and institutional. Since most of the issues raised are under consideration in Malaysia, proposals for reform should take into account the experience of other jurisdictions to minimize exacerbating problems faced by shareholders in exercising voice over exit choice.

Return to Text FOOTNOTES: n1 See KLSE & Price Waterhouse Coopers, 'Joint Survey of the Corporate Governance Practice of Public Listed Companies' (1998), where almost all (97%) of the companies surveyed have substantial shareholders as members of the board, out of which over a third (39%) are involved in the management of companies. n2 See Dallas LL, 'The Control and Conflict of Interests Voting System' (1992) 71 North Carolina Law Review 1, at pp 41-44. Professor Dallas gave arguments why voice is a preferable choice over exit as a method of assuring managerial accountability. See also Black BS, 'The Value of Institutional Investor Monitoring: The Empirical Evidence' (1992) 39 UCLA L Rev 895; See Goforth C, 'Proxy Reforms as a Means of Increasing Shareholder Participation in Corporate Governance: Too Little, But Not too Late' (1994) 43 Am UL Rev 379, at pp 406-408; see also Barnard JW, 'Shareholder Access to the Proxy Revisited' (1990) 40 Catholic Univ Law Review 37, at pp 82-84, citing three reasons for increased institutional shareholders' activism: (i) the limitation on their ability to exit quickly, (ii) the existence of regulatory oversights over the exercise of their voting power in companies they invest in, and (iii) the reduction in the cost for exercising voting rights and gathering information. n3 Tan Guan Eng v BH Low Holdings Sdn Bhd & Ors and anor action ; Tan Keh Ho v Telipok Lumber Industries Sdn Bhd v Ors. Petition no k 26-01 of 1993 High Court Kota Kinabalu, 30 Oct 1993; Indrani a/p C Rajaratnam & Ors v Fairview Schools Bhd . n4 n5 Tong Keng Meng v Inno-pacific Holdings Ltd & Anor . See Australian Securities & Investment Commission v Whitlam [2002] NSWSC 591, at para 151. The

Page 10 The Malayan Law Journal Articles

issue in this case was the breach of directors duty under ss 232(2), (6) and 250A of the Corporations Law. The plaintiff claimed that this failure to vote in accordance with the instructions of the member is a breach of directors' duty under s 180 and 181 of the Australian corporations Act 2001. The provisions of the Australian corporations Law are deemed to be included in the Australian corporations Act 2001 by sec 1401. In this case, the chairman was appointed as proxy and failed to sign the poll papers. The company's articles required poll papers to be signed. At the AGM, the company secretary had reminded the proxy who has been appointed to sign the poll papers and had stated that failure to sign will cause the poll papers to be invalid. The court decided that the defendant had breached his duty under s 232 and 250A when he failed to sign the poll papers by 3.973 members of the company. n6 See s 249Y of the Australian Corporations Act 2001. In Malaysia, this is governed by the common law instead of statute. n7 Tong Keng Meng v Inno-pacific Holdings Ltd & Anor .

n8 Several types of instructions may be given to the proxy. A proxy may be given total discretion to cast the votes. A proxy may be instructed to vote for or against a proposal at the meeting If a proxy form does not specify any specific instruction to vote, then the proxy is assumed to have been given discretion. If a two-way proxy form is used and no indication stated as to how votes should be cast, the proxy is deemed to have been given discretion. n9 n10 United States Model Business Corporation Act, s 7.22. .

n11 What was the status of the votes cast by Ms Quah was important because it has several different implications. The court summarized these different implications as: If the votes cast on behalf of Ms Teo were treated as spoilt votes, this will result in the passing of the resolutions for removal of existing director. Although with smaller majority; If the votes were treated as being for the resolutions to remove existing directors, then the resolution would have been passed; If the votes were treated as against the resolutions to remove the existing directors, in accordance with the instructions of Ms Teo, the resolutions would not have been passed. n12 See s 250A(4)(b) of the Australian corporations Act 1965; see also s 249X(3) of the Australian Corporations Act 2001 which states that if the member appoint 2 proxies without specifying the division of the votes, the proxies are entitled to exercise half of the votes. See para 7.22 of the KLSE LR on 'Appointment of more than one proxy' where it is provided that: 'Where a member of the company is an authorized nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one proxy in respect of each securities account it holds with ordinary shares of the company standing to the credit of the said securities account.' 13 Goforth C, 'Proxy Reforms as a Means of Increasing Shareholder Participation in Corporate Governance: Too Little, But Not Too Late' (1994) 43 Am UL Rev 379, at pp 399-400. Black BS, 'Shareholder Passivity Reexamined' (1990) 89 Mich LR 520, at pp 539-540. The imbalance in favor of directors in shareholders proposals has been clarified by Black (commenting on a similar provision of the US Securities

Page 11 The Malayan Law Journal Articles

exchange Act):

Cont'd next page

n13 'A qualifying proposal must be listed on the company's proxy card, and the proponent has 500 words in the proxy statement to present a supporting statement. [The proponent] won't know until after the meeting how many votes the proposal has received. In contrast, the company's managers can make an opposing statement of any length, note their opposition in bold print on the proxy card, spend corporate funds to solicit votes against the proposal, and review the ballots as they come in and resolicit shareholders who vote for the proposal.' The Malaysian equivalent (s 151 of the Companies Act 1965) limits the proposal to 1000 words only. n14 n15 Section 151(5) of the Companies Act 1965. NRMA v Parker .

n16 See Goforth C, 'Proxy Reforms as a Means of Increasing Shareholder Participation in Corporate Governance: Too Little, But Not Too Late' (1994) 43 Am UL Rev 379, at p 459. Prof Goforth cites a case where the 'ordinary business rule' has been used by companies to disenfranchise shareholders, supported by the SEC's exclusionary rulings on matters which are not within the 'proper purpose'. The matters excluded are nominating directors (based on the SEC Rule 14a-8 that exclude any proposal relating to elections to office from proxy materials), asking for a vote of no confidence, limitation on the number of offices etc. n17 n18 n19 n20 See s 149(3) of the Malaysian Companies Act 1965. Levin v Metro Goldwyn Mayer Inc, 264 F Supp 797. Advance Bank Australia Ltd v FAI Insurance Ltd . Cox JD, Hazen & O'Neal, Corporations (1998) Aspen Law & Business, at p 337.

n21 This subsection has undergone changes in Australia, where the locus standi for exercising this right is based on not less than 100 members only. n22 Banard JW, supra n 1, at p 94. n23 See Black BS, 'Agents Watching Agents: The Promise of Institutional Investors Voice' (1992) 39 UCLA L Rev 811: n24 Shan M, 'New Forms for Tai Wah Shareholders' The Edge, 4 November 2002 at 12; Yeap C, 'Tai Wah minorities to file complaint next week' Business Times New Straits Times, 2 November 2002 at B1. n25 See David Lau Tai Beck v Lau Ek Ching Sdn Bhd where a company's meeting which was convened

Page 12 The Malayan Law Journal Articles

for 28 October 1970 was postponed to 17 November 1970. The plaintiff was not informed but the other members were informed verbally. The Articles of Association allow for meetings to be adjourned. The court held that once a meeting has been called it cannot be postponed except in accordance with the articles. n26 See Bonollo F, 'Electronic Meeting' 2002 AJCL LEXIS 7; Boros E, The Online Corporation: Electronic Corporate Communications-Discussion Paper (Dec 1999) Center for Corporate Law & Securities Regulation, University of Melbourne; See also Jacqueline Cook, Information and Communication Technology: The Internet and Company Law, ESRC Center for Business Research, University of Cambridge July 1999; See also NAPF report at http://www.napf.co.uk. n27 See s 250BA of the Australian Corporations Act 2001. (1) In a notice of meeting for a meeting of the members of a company, the company: (a) must specify a place and a fax number; and (b) may specify an electronic address; for the purposes of receipt of proxy appointments. (2) This section applies only to a company that is included in an official list of the Exchange. (3) This section applies despite anything in the company's constitution. It may also be possible to utilize ICT in corporate communications via general meeting's approval as was done in the AGM of Yong Tai Bhd to be held on 18 December 2002 where the company proposes to obtain members' approval for the issue of the company's Annual report in CD-Rom for the financial year ended June 2003 and for subsequent financial years. n28 Gerald Parshalle & Anor v Real Roy & Anor 567 A 2d 19; 1989 del Ch LEXIS 113. The company has a provision in its byelaws that proxy which is transmitted by datagram shall not be invalid due to the method of transmission. The court however decided that transmission was not the issue. Rather it was the absence of information on the instruments that is required to establish their authenticity and the instruction by members. n29 Ibid.

n30 Center for Corporate Law & Securities Regulation, University of Melbourne and Institutional Analysis Pty Ltd, Corporate Governance: The Role of Superannuation Trustees (December 2000). See also the Securities Commission Consultation Paper, infra n 30. n31 See the Malaysian Securities Commission Guidelines on Unit Trust Funds, cl 13.1.3 and para 3(c) of the Practice Note 11. The Australian CLERP 9 proposal includes suggestions to improve shareholders communication by considering the formulation of new rules and codes of best practice. See http://www.treasury.gov.au Clerp Paper No 9: Proposals for Reform: Corporate Disclosure ID403 visited on the 12 December 2002. n32 n33 Goforth C, supra n 12, at pp 460-465. Ibid.

n34 See s 251AA of the Australian Corporations Act 2001: Disclosure of proxy votes-listed companies; (1) A company must record in the minutes of a meeting, in respect of each resolution in the notice of meeting, the total number of proxy votes exercisable by all proxies validly appointed and:

Page 13 The Malayan Law Journal Articles

(a) if the resolution is decided by a show of hands-the total number of proxy votes in respect of which the appointments specified that: (i) the proxy is to vote for the resolution; and (ii) the proxy is to vote against the resolution; and (iii) the proxy is to abstain on the resolution; and (iv) the proxy may vote at the proxy's discretion; and (b) if the resolution is decided on a poll-the information specified in para (a) and the total number of votes cast on the poll: (i) in favor of the resolution; and (ii) against the resolution; and (iii) abstaining on the resolution. (2) A company that must notify the Exchange of a resolution passed by members at a meeting of the company must, at the same time, give the Exchange the information specified in subsection (1). (3) This section applies only to a company that is included in an official list of the Exchange. (4) This section applies despite anything in the company's constitution. See also Palmiter AR, 'Mutual Fund Voting of Portfolio Shares: Why Not Disclose?' 23 Cardozo L Rev 1419; where mandatory disclosure of voting is proposed for the institutional shareholders themselves; see also Australian Securities & Investment Commission v Whitlam [2002] NSWSC 591. n35 Sec 149(2) of the CA 1965.

n36 See Tong Keng Meng v Inno-pacific Holdings Ltd & Anor . In this case, Ms Quah was soliciting for votes. She was not a director of the company so she owed no fiduciary duty towards the members who agreed to appoint her as proxy. In her letter distributed to all members to solicit for appointment as proxy, she explained clearly that she wishes to vote for the removal of Mr Tong, Mr Phua and Mr Chew and appoint the persons nominated in the notice as new directors. n37 Black BS, 'Shareholder Passivity Reexamined' (1990) 89 Mich LR 520, at 539-540, where the author outlined the filing procedure for proxy solicitation materials and the effect of the cumbersome procedure for proxy solicitation by shareholders. See also Ige Omotayo Bolodeoku, 'A Critique of the Theories Underpinning Proxy Solicitation by the Board of Directors' (2001) JBL 377, at p 380. See also Sharara NM & Hoke-Witherspoon AE, 'The Evolution of the 1992 Shareholder Communication Proxy Rules and Their Impact on Corporate Governance', (1993) 49 The Business Lawyer 327, where the article mentioned that the proxy rules adopted by the SEC in 1992 and the SEC's reluctance to define soliciting proxy authority have affected shareholders' communication. Although the SEC did attempt to soften the rigid rule by allowing shareholders to publicize how they intend to vote and reasons for so deciding, the authors argued that there is a difference between publicizing how a shareholder will vote and influencing others to give deny or revoke a proxy; See also Gilson RJ & Kraakman R, 'Reinventing the Outside Director: An Agenda for Institutional Investors' [1991] 43 Stanford Law Review 863, at p 894. The authors stated that the federal proxy rules do not provide for the director nominees by institutional shareholders to be named in the company's proxy statement. However, they argued that this should not deter institutional shareholders since the costs of preparing and distributing the statement is not prohibitive to institutional shareholders' involvement. The securities exchange Act requires filing of information relating to beneficial ownership of shares if a shareholder or group of shareholder acquires over 5% of the issued securities of a company or if a group is formed to acquire, hold, vote or dispose 5% of the company's stock. The authors argued that institutional shareholders will not be in violation of filing under the statute since their concentrated effort to nominate a director is not agreement to vote their shares for the director's election.

Page 14 The Malayan Law Journal Articles

n38 The focus on directors is based on the corporate governance debate in several cases, for example, Isle of Wight Railway Co v Tahourdin (1883) 25 Ch D 320 at p 331. Prof Gower said that if shareholders do not like the way the company is performing, they should not re-elect the directors. n39 Heard JE, 'Executive Compensation: Perspective of the Institutional Investor' 63 U Cin L Rev 749, 754-755. n40 .

n41 In Australian Securities & Investment Commission v Whitlam [2002] NSWSC 591, para 162 for example, the chairman's failure to sign the poll papers resulted in the votes he cast as proxy to be rejected in accordance with the company's articles that requires signing of poll papers by proxies. n42 Fraser v NRMA Holdings Ltd (1995)15 ACSR 590; Devereaux Holdings Pty Ltd v Pelsart Resources NL (No 2) ; Chequerpoint Securities Ltd v Claremont Petroleum NL ; see s 131 of the Malaysian Companies Act 1965. n43 Lim Koei Ing v Pan Asia Shipyard & Engineering Co Pte Ltd .

n44 Australian Securities & Investment Commission v Whitlam [2002] NSWSC 591; see s 250A(4)(c) of the Australian Corporations Act 2001. n45 Black BS, 'The Value of Institutional Investor Monitoring: The Empirical Evidence' (1992) 39 UCLA L Rev 895, supporting arguments that institutional shareholders do add value to corporate governance and that there is little evidence that institutional shareholders' oversight is harmful: see above fn; see Ramsay IM & Blair M, 'Ownership Concentration, Institutional Investment and Corporate Governance: An Empirical Investigation of 100 Australian Companies' (1993-1994) Vol 19 No 1-2 Mel Univ LR 153. See also the Malaysian High Level Finance Committee on Corporate Governance's Report on Corporate Governance, (1999, Kuala Lumpur) at para 4.79. See the Securities Commission's Consultation Paper on the Exercise of Voting Rights by Unit Trust Management Companies to Appoint Directors onto the Board of Investee Companies. (CP-1), June 2002, at p 3. n46 EPF, for example, saw an increase in funds of 3.8% to RM184.57 billion, with 21% of total investment in 2001 in equity: 'That Sinking Feeling', The Edge, 30 Sept - 6 Oct 2002, at p 58. As at August 2002, the total NAV of unit trust funds made up about 10.41% of the total market capitalization of the KLSE. Data up to 1997 showed that institutional investors in the United Kingdom hold about 60 per cent of shares in listed UK companies; individuals hold about 20 per cent; and non-UK institutions hold the remainder 20 percent: see Committee on Corporate Governance, Report of the Committee on Corporate Governance (Gee and Co, London, 1997) (the Hampel Committee report). n47 Ramsay IM & Blair M, 'Ownership Concentration, Institutional Investment and Corporate Governance: An Empirical Investigation of 100 Australian Companies' (1993-1994) Vol 19 No 1-2 Mel Univ LR 153 discussed two legal impediments to institutional shareholders' activism in Australian companies: firstly, the limit of shareholding by banks in Australian companies, secondly, the prudent person rule employed by courts to evaluate whether a trustee has discharged its investment duties properly. The authors also noted other

Page 15 The Malayan Law Journal Articles

impediments, for example, the problems of communication and voting due to s 252 of the Corporations Law (which has undergone some changes under the Australian Corporations Act 2002) and the prohibition on investment companies holding not more than 5% of the share capital of any company. n48 Ramsay IM, Stapledon GP & Fong K, 'Corporate Governance: The Perspective of Australian Institutional Shareholders' (2000) 18 C& SLJ 110. n49 Ibid.

n50 Stapledon PG, Easterbrook S, Bennet P & Ramsay IM, Proxy Voting in Australia's Largest Companies (2000) cited by Baxt R, Ramsay IM & Stapledon PG, 'Corporate Governance in Australia: The Evolving Legal Framework and Empirical Evidence', and in Corporate Governance: An Asia-Pacific Critique (2002) Low CK (Gen Ed) Hong Kong: Sweet & Maxwell, at p 177. n51 http://www.napf.co.uk, visited on 8 October 2002.

n52 Cheffins BR, Company Law: Theory, Structure and Operation (1997) Clarendon Press, Oxford, at pp 644-645. Since the decision of institutional investors to enforce any monitoring function is related to whether enforcing compliance is a worthwhile project, Cheffins argued that the straightforward contents of the Code 'provide a manageable agenda' to institutional investors. This will foster cooperation between institutional investors and give considerable weight to the institutional investors' influence on a company. US is a jurisdiction that has mandatory voting based on the existence of ERISA: see above Banard JW, above fn 1. n53 See Black BS, 'The Value of Institutional Investor Monitoring: The Empirical Evidence' (1992) 3;9 UCLA L Rev 895, at p 899, where he identified areas where institutional shareholders can be involved, 'by enhancing director independence, discouraging corporate diversification, pressing bidders to abandon suspect takeover bids, pressing targets to consent to value-increasing takeovers, insisting on more efficient governance rules, making it harder for managers to hoard unneeded cash, and establishing a more arm's-length process for setting CEO pay'. See also Dallas LL, 'The Control and Conflict of Interests Voting System' (1992) 71 North Carolina Law Review 1 where Professor Dallas proposed two situations where shareholders' vote should be obtained and these are issues affecting change in control of the corporation and conflict of interests situations. n54 Securities Commission Consultation Paper on the exercise of voting rights by unit trust management companies to appoint directors onto the board of investee companies (CP-1), June 2002, at http://www.sc.com.my (visited on 18 September 2002). n55 Calpers Statement of Policy for Representation on Corporate Board of Directors, March 1998.

n56 See Institutional Investment in the United Kingdom: A Review, Final Report (6 March 2001) (Chairman: Myners) UK Treasury available at http://www.hm.treasury.gov.uk n57 See Kam FS, The Legal Nature of Unit Trust (1997) Clarendon Press: Oxford; See AIMA Standard Investment Management Agreement 1995, cl 12.1 that the trustee confers the right to vote attached to a share forming part of the portfolio of the unit trust scheme to the manager or to direct the custodian (the person in

Page 16 The Malayan Law Journal Articles

whose name the shares are registered). The manager must use his best endeavors to implement the instruction of the trustee relating to proxy appointment and voting by proxy but the manager may exercise or not exercise the right to vote as he thinks fit in accordance to any general direction contained in the investment instructions. n58 Ramsay IM, Stapledon GP & Fong K, 'Corporate Governance: The Perspective of Australian Institutional Shareholders' (2000) 18 C & SLJ 110. However, this has been remedied in Australia via the Managed Investments Act 1998 (Cth). See G Stapledon, Institutional Shareholders and Corporate Governance (1996) Clarendon Press, Oxford at pp 178-182, 289 fn 43, where he recommends the repeal of s 1069(1)(k) of the Australian Corporations Law that requires unit trust managers to obtain unit holders' consent before voting on the election of a director in the investee companies. Stapledon cited the recommendations of the Australian Securities Commission made in the Parliamentary Joint Committee on Corporations and Securities Issue Paper entitled 'Inquiry into the Role and Activities of Institutional Investors in Australia' (1994) para 4.26 & 4.27. n59 Nicoll, G 'Funds Management and Corporate Governance Following the Managed Investments Bill 1997' 1998 AJCL LEXIS 4. n60 OECD Principles of Corporate Governance, 1999, see annotations to the OECD Principles of Corporate Governance, Part I. n61 See Palmiter AR, 'Mutual Fund Voting of Portfolio Shares: Why Not Disclose?' 23 Cardozo L Rev 1419; where the author discuses the costs and benefits of mandating mutual funds to have policy for exercising their votes in investee companies and disclosing their voting policy as well as actual voting. However, there is a conflict between disclosure of voting policy and actual vote with the proponents for confidentiality of voting. n62 The Finance Committee of Corporate Governance, Report on Corporate Governance (Feb 1999) Kuala Lumpur, at Ch 6, para 2.1.25, at p 206. For further reading, see Gordon JN, 'Institutions as Relational Investors: A New Look at Cumulative Voting' (1994) 94 Column L Rev 124; Banard JW, 'Shareholder Access to the Proxy Revisited' (1990) 40 Cath UL Rev 37. Another issue is the 'one share, one vote' policy and the use of bundled resolution. n63 See Gordon JN, 'Institutions as Relational Investors: A New Look at Cumulative Voting' (1994) 94 Colum L Rev 124 on the rise and fall of mandatory cumulative voting in several states in the US. Prof Gordon suggests a new rationale for cumulative voting. Instead of considering its impact on increasing hostile takeover bids, which was one of the reasons for the elimination of cumulative voting, cumulative voting should be considered as a corporate governance tool in situations which do not involve change on control. n64 Supra n 50 for NAPF; supra n 54 for CALPERS.

n65 Gordon JN, 'Institutions as Relational Investors: A New Look at Cumulative Voting' (1994) 94 Colum L Rev 124 at pp 127-128. According to Prof Gordon, this approach is sustainable since it does not require institutional shareholders to have competency in deciding the business decision and management strategies that a company should or should not do. Instead it focuses on the institutions' competency to elect monitors of management through the board selection process.

Page 17 The Malayan Law Journal Articles

n66 See Black BS, 'Agents Watching Agents: The Promise of Institutional Investors Voice' (1992) 39 UCLA L Rev 811. n67 n68 Gordon JN, supra n 54, at pp 161-162. Ibid, at pp 166-170.

n69 See Goforth, supra n 12, at pp 424-425. Prof Goforth cites theoretical evidence both contradicting and supporting the argument that directors nominated by shareholders and dependent on shareholders for renomination could improve decision-making at board level, producing optimal results and better decision.