Shareholder Rights and Executive Compensation

Very Hard Corporate Governance Shareholder Rights

XYZ Corporation is facing significant pressure from various activist shareholders advocating for a more robust approach to corporate governance. Recently, a group of these shareholders proposed the introduction of a 'Say on Pay' policy that would give shareholders a binding vote on executive compensation packages at each annual meeting. Furthermore, they highlighted the need for improved transparency regarding the company's strategic decisions that directly affect shareholder returns.

The board of directors of XYZ Corporation is divided on the implementation of this policy, with some members emphasizing the potential risks of undermining managerial discretion. They argue that direct shareholder involvement in such decisions could hinder effective management and decision-making. Others, however, believe that adherence to shareholder wishes in executive compensation is crucial for fostering trust and aligning management incentives with shareholder interests.

Given this context, which of the following statements about shareholder rights and corporate governance is most accurate?

Shareholders have the ability to influence executive compensation decisions only if they hold a majority of shares.

The introduction of a 'Say on Pay' policy typically enhances the alignment of interests between shareholders and management.

Shareholders cannot propose changes to corporate governance policies unless they are part of an institutional investor network.

Hint

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