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‘Shareholder Spring’ failed to make waves


Themes: Finance

Professor Raghavendra Rau and Dr Bang Dang Nguyen agree that the so-called ‘Shareholder Spring’ has proved to be a damp squib

Two acknowledged leading financial thinkers believe the much-vaunted ‘Shareholder Spring’ that began to emerge in the spring of 2012 was more of a media creation than a shareholder-led rebellion.

Professor Raghavendra Rau, Sir Evelyn de Rothschild Professor of Finance, and his Cambridge Judge Business School colleague, University Lecturer in Finance Dr Bang Dang Nguyen, discuss the shareholder unrest.

Asked if the ‘Shareholder Spring’ was real, Dr Nguyen says the answer was ‘yes and no’.

“Yes, because, if you look at the popular press and everyday you had a story every day about shareholder revolt against executive pay, but ‘no’ if you look at how effective it is as a movement.”

To Professor Rau, the Shareholder Spring is a part of the regular economic cycle.

“Nobody really cares if their company is not performing as well as it could be as long as he returns are positive. When the returns start getting negative then people say ‘wait a minute why do we pay executives so much, why are we giving our board of directors a free ride?’

“That’s when you actually see this and it happens every time in the cycle. So [during] downturns in the economy, you see there’s evidence of loss. Looks like a Shareholder Spring, but it kinds of peters out when the economy goes up again.”