Gadfly

Who is a Gadfly?

A gadfly is responsible for attending the regular meetings and raising questions for the rights of the shareholders. They address a wide Range of issues concerning corporate policy.

Basically, the term Gadfly meaning is used to describe the insects that irritate the livestock. Likewise, the term is used for investors who annoy the executives until they take some action on their suggested plans or look after the shareholders’ concerns. It is the gadfly who raises several questions about the compensation and meeting locations. Being an investor of the company, a gadfly has the right to question the executives about the shareholder’s compensation and the inconvenience they have to deal with.

What are the Gadflies Responsible for?

Being the part of the company’s activist shareholders, a gadfly proposes certain suggestions for shareholders and the company. They usually raise these issues at the general corporate meeting. These concerns do not necessarily have to be related to the shareholders of the company. Whatever suggestions a gadfly proposes must be taken into consideration. Mostly, companies allow a gadfly to put across their proposal. Then, the company starts a voting system to know the opinions of other parties involved.

At the next meeting, all executives and shareholders are asked to give their votes concerning the latest suggestion proposed by a gadfly. Usually, these investors raise issues that the management failed to address. The proposal could be related to the proxy server, voting system, social responsibility, environmental obligations, executives and shareholders compensation, corporate spending, and other such issues.

A gadfly does not own a major part of the company’s shares. That’s the reason why they don’t have a direct influence on the company’s board of directors. It is mandatory for a gadfly to own shares worth at least Rs. 2000k for more than one year.

How Do Gadflies Affect the Corporation?

Each company needs to have a gadfly who focuses on the issues that would otherwise be neglected. Basically, a gadfly supports small investors who can’t speak up against the executives and managers for their rights. A gadfly has the right to put their opinions across if they believe the small investors and stockholders are not being able to exercise their rights properly.

According to the 2016 survey, approx 1000 shareholders’ issues were taken into consideration, among which, 400 issues were related to environmental and social subjects. Some critics believe that these concerns raised by the activist shareholders cost thousands of bucks to companies.

In fact, most companies have to spend as much as Rs. 87,000k to consider gadfly’s proposal and take action on it. Another issue is that critics believe that a majority of these issues are regarding the labor unions. Gadflies are mainly concerned about the small group of investors. Most of their proposals intend to boost the morale of these small investors and help them exercise their rights in the best way.