"As the US shareholder base has largely consolidated into the institutional investor community over the past two decades and those investors have become more organized and focused on exerting the influence inherent in their substantial ownership stakes, we have seen in recent years an accelerating shift in the 'balance of authority' exercised by boards and shareholders in the corporate decision-making process." So writes Shearman & Sterling's John Madden
in his new article, "The Shifting Landscape of Corporate Governance," published in BNA's Corporate Governance Report
. Madden notes that the growth and increased activism of institutional investors, combined with Sarbanes-Oxley and more recent regulatory developments, several coming out of the financial crisis, have accelerated this shift. He points to weakening takeover defenses, increased majority voting, successful proxy contests, the prospect of proxy access, and shareholder involvement in executive compensation (including "say on pay") as some of the key indicators. Madden concludes by outlining the four steps boards should take to improve performance and gain shareholder support: (1) review board composition and size; (2) clarify requisite director commitment and align compensation; (3) focus on key issues and operate efficiently; and (4) know, and constructively engage with, shareholders.