Shareholder rebellion occurs when a company’s stockholders go against the Board of Directors of a company and either try to oppose their decisions or throw out its members.
The shareholders may rebel at a corporate annual meeting or through a proxy battle (when several shareholders are persuaded to join forces and build up enough shareholder proxies to win a corporate vote).
A shareholder rebellion may also involve stockholders threatening to crash the corporation’s share price through concentrated selling.
Michael Eisner, who was CEO of The Walt Disney Company from 1984 to 2005, was stripped of the Chairmanship in 2004 after Roy Disney, Walt Disney’s nephew, led a shareholder rebellion claiming Mr. Eisner was causing a creative brain drain by micromanaging the company’s employees.
In 2008, fifteen descendants of John D. Rockefeller joined a shareholder rebellion, forcing oil giant Exxon to change its policies on climate change.
Bank shareholder becoming more rebellious
Over the past couple of years, several banks in Europe and North America have faced shareholder rebellions regarding executive bonuses. Many stockholders, as well as much of the general public, wonder whether banking executives are going back to their old behaviors, which they believe contributed to the 2008 global financial crisis.
Standard Chartered PLC, a British multinational banking and financial services company, faced a shareholder rebellion over executive pay in its May 2014 annual meeting. Its 3-year pay policy was opposed by 41% of shareholders, bringing it close to scraping its plans. Stockholders were annoyed that the bank wanted to boost bonus pay while at the same time issuing a profit warning.
In May 2014, twenty-one percent of HSBC shareholders opposed a proposed pay policy. Even though opposition was sizeable, it was not enough to block the banking giant’s proposal, which included bonuses of up to 200% of salaries.
Shareholders across the UK are increasingly fed up with banks that continue paying large bonuses to underperforming executives.
According to Cambridge Dictionaries Online, shareholder rebellion is:
“A situation in which a group of a company’s shareholders vote against particular decisions made by its directors.”
Video – JPMorgan boss Jamie Dimon survives shareholder rebellion
Jamie Dimon, chairman, president and chief executive officer of JPMorgan Chase, was allowed to keep his jobs after surviving a shareholder rebellion in 2013.