Chris Hughes is a Bloomberg Gadfly columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

The board sets strategy and investors should let managers get on with it. Shareholders are generally willing to go along with that old chestnut, as long as they can hold management to account.

The failure of Elliott Advisors to secure a vote to oust the chairman of Akzo Nobel NV shows investors don't always have the powers they think they have.

In it For The Long Haul
Akzo stock has underperformed European chemicals peers over the last decade
Source: Bloomberg

In April, Elliott sought a shareholder meeting, with the backing of at least 10 percent of Akzo's investors. They hoped that changing the chairman would force the company to enter into talks with would-be bidder PPG Industries Inc. Akzo rejected the demand, saying a vote would be damaging, and the hedge fund went to court.

On Monday, the court ruled in favor of the Dutch company. Akzo didn't have to involve shareholders in its decisions and was under no obligation to enter into negotiations with a suitor.

Big shareholders often think they can boss bosses around because they see themselves as owners. In reality, they possess shares with certain rights attached, which is slightly different.

Verdict On The Verdict
Akzo Nobel fell after a court agreed it didn't have to give dissident investors an EGM
Source: Bloomberg
Intraday times are displayed in ET.

When it comes to Dutch companies such as Akzo, owning shares may confer the right to request an extraordinary general meeting and to vote at annual meetings. But there's no automatic right to an EGM, as Elliott has found, and directors only come up for election every four years. This is a long way from calling the shots.

Under the Dutch civil code, directors "shall in the performance of their duties direct their attention to the interests of the corporation and of the enterprises connected with it." There is no primary obligation to shareholders.

The judge told Akzo to fix its relations with long-term shareholders. He didn't say how.

Akzo may decide to give more detail about how its vision as a standalone company will stack up against any offer from PPG. But it really needs to address the perception that it's a company run by management for management, hiding under the cover of stakeholder concerns.

Here's how it could do that. The company's defense strategy includes targets for 2020. Add some near-term goals. And then set out how executive pay will be tied to those being met.

There's a risk that if PPG decides to walk away, Akzo's managers will think they have won a victory. They need to resist that temptation. Sure, the law allows them to ignore a significant proportion of its shareholders. But they can only paint over the differences for so long.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Chris Hughes in London at

To contact the editor responsible for this story:
Edward Evans at