Shareholder Activism and Litigation Against UK Banks - The Limits of Company Law and the Desperate Resort to Human Rights Claims?
DIRECTORS' DUTIES AND SHAREHOLDER LITIGATION IN THE WAKE OF THE FINANCIAL CRISIS, Joan Loughrey (ed), pp143-172, Cheltenham: Edward Elgar, 2013
25 Pages Posted: 22 May 2013
Date Written: May 22, 2013
Abstract
In the wake of the Global Financial Crisis (GFC), banks in the UK and other parts of the world suffered significant financial losses. One of the findings of official inquiries into the GFC and its effects in the UK is that shareholders were remarkably docile during the height of the market euphoria. Shareholders made very little effort to constrain banks from taking more risky business strategies. In addition, shareholders have been slow to bring legal actions against directors of loss-making banks and financial institutions. This is despite the fact that company law provides a wide range of mechanisms for shareholder activism, such as the powers of shareholders to elect and dismiss directors, (through the General Meeting), and to bring legal actions against directors for breach of statutory and fiduciary duties. This suggests that company law is, in practice, something rather different from what it is claimed to be in theory.
This chapter explores some of the reasons for this divergence and looks at ways of bridging this gap between company law in theory and in practice. In so doing it examines the use of human rights claims as a last resort where the more traditional company law principles have proved to be inadequate with regards to fostering shareholder activism.
Keywords: Global Financial Crisis, Northern Rock, shareholder activism, institutional shareholders
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