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Shareholder Empowerment

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Submitted By aiklynn
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Introduction: Shareholder empowerment in Malaysia
Presently, Shareholders of public companies in Malaysia have limited power in making corporate decision. The precise scope of the powers of each organ is defined by the company’s articles of association, general principles of company law and the Companies Act 1965. Directors usually have the power to manage the business of the company, with the members being entitled to vote only on limited matters expressly reserved to them by the articles of association or the Companies Act 1965. Although they are granted the rights to make decision on the management board and the approval rights in passing directors’ proposals, some shareholders find it inadequate as the current approval rights is a fairly weak tool in controlling agency problem. With wide and in-depth coverage of ongoing corporate tussles, shareholder awareness has improved to the point that shareholders now want to hold management accountable to proper corporate governance. Hence, in this essay, the issue of whether Malaysia should encourage shareholder empowerment to improve corporate governance in companies and thereby attract more foreign direct investment is discussed. To support my arguments three main decision-making power; rules-of the-game, game-ending and scaling-down; as well as the approval rights and proposal rights are discussed.

Definition of Shareholder empowerment
Shareholder empowerment means the increasing rights given to shareholder to participate in corporate decisions. These rights include the proposal rights and approval rights, which could be classified under the rights to decide. Right to propose emphasize on shareholders right to initiate their proposals to control managerial agency problem whereas right to approve emphasize on the approval of managerial proposal. Similarly, according to Bratton and Wachter, shareholder empowerment

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