The proper role of shareholders in the decision making processes of modern large Australian public companies

Abstract

Calls for increased shareholder intervention in the routine business operations of large Australian public companies should be reconsidered. Constant shareholder involvement in matters concerning the management of a company’s the routine business affairs is likely to cause several intractable problems. Most shareholders do not have the information or skills necessary to make sound decisions on either operational or policy issues. In any event, given that they are a collection of individuals and groups of people with different, and often, irreconcilable interests, shareholder opinions are bound to differ as to which course will best serve the interest of a company. Increased shareholder intervention in operational issues thus poses the threat of a decline in the quality of corporate decision making. For these reasons, the management of the business affairs of large, complex companies should continue to be the primary responsibility of boards of directors. Directors are, more often than not, better informed about the long-term prospects and value of a company. Therefore, in order to maximise the value of public companies, shareholder participation in decision-making should continue to occur in limited circumstances, as a means of promoting the accountability of directors.