Stewardship and collective action: the Australian experience

The growth of shareholder stewardship codes around the globe reflects a belief that greater engagement by institutional shareholders improves corporate decision-making and protects against excessive risk-taking. In theory, there is considerable sense in shareholders undertaking their stewardship activities collectively, to leverage their power, pool resources and share costs, making stewardship more feasible and less speculative. This chapter examines collective action in Australia, which constitutes a nuanced corporate governance practice. Evidence indicates that investors do not routinely engage in direct forms of collective action, preferring to leverage their collective influence through intermediary organizations that undertake behind-the-scenes engagement activities for investors. The nuanced image emerging from the Australian experience highlights that collective action by institutional shareholders is by no means a simple governance phenomenon. This chapter explores the implications of this insight for how securities and takeover laws apply to collective action, and how the issuers of stewardship codes frame their codes’ expectations regarding collective action.