6.1 Introduction

In topic 3 we discussed the need for good corporate governance as a way for corporations to govern themselves. In this chapter we discuss two ways that corporate governance is externally evaluated and, if either corporate governance or firm performance is deemed inadequate, action is taken to hold firms accountable.

We begin by discussing the proxy solicitation process—the way corporations facilitate the voting by shareholders. We then discuss proxy advisory firms and their roles in helping institutional investors vote on corporate matters. We conclude the chapter by discussing shareholder activism and how activist investors seek to improve corporate governance and/or firm performance and hold corporations accountable.