Do You Think Shareholder Activism Works
IN YOUR OPINION DYOU THINK SHAREHOLDER ACTIVISM WORKS, WHY OR WHY NOT
Shareholder Activism refers to a range of actions taken by a shareholder to influence corporate management and board. Actions range from threatening the sale of shares (“exit”), letter writing, meetings management, to asking questions at shareholders meetings and the use of corporate voting rights. The common definition of a shareholder activist is a shareholder “who tries to change the status quo through the “voice”, without changing control of the firm. Shareholder activism in the United States dates back to the 1930’s, when Henry Ford cancelled a special dividend, so as to spend money on social objectives. For the first time in the history of corporate America, shareholders objected and took the matter to the court. The court did not side with the firm’s management, but made way for its shareholders to receive their special dividend.
In the 1980’s, shareholder activism took a more aggressive approach with corporate raiders like Paul Getty. Shareholders took on management by engaging in hostile takeovers and leveraged-buyouts to gain control of undervalued and underperforming companies. In the 1990’s shareholder activism found mainstream pension fund managers like the California Public Employees’ Retirement Scheme, pushing for the repeal of staggered boards and poison pills. These fund managers used a form of “quiet” activism – favouring abstentions and withholding votes for important proxy issues – as a way to influence management and board decisions. In recent years, shareholder activism has once again changed, with the hedge funds emerging as leading the most aggressive activism campaigns.
In corporate America, shareholder activism is greatly hindered by a complexity of legal rules and regulatory systems. According to US federal and state laws, the only way a shareholder can force a firm’s existing managers to pursue alternative strategies or changes in corporate governance, is through
Shareholder Activism refers to a range of actions taken by a shareholder to influence corporate management and board. Actions range from threatening the sale of shares (“exit”), letter writing, meetings management, to asking questions at shareholders meetings and the use of corporate voting rights. The common definition of a shareholder activist is a shareholder “who tries to change the status quo through the “voice”, without changing control of the firm. Shareholder activism in the United States dates back to the 1930’s, when Henry Ford cancelled a special dividend, so as to spend money on social objectives. For the first time in the history of corporate America, shareholders objected and took the matter to the court. The court did not side with the firm’s management, but made way for its shareholders to receive their special dividend.
In the 1980’s, shareholder activism took a more aggressive approach with corporate raiders like Paul Getty. Shareholders took on management by engaging in hostile takeovers and leveraged-buyouts to gain control of undervalued and underperforming companies. In the 1990’s shareholder activism found mainstream pension fund managers like the California Public Employees’ Retirement Scheme, pushing for the repeal of staggered boards and poison pills. These fund managers used a form of “quiet” activism – favouring abstentions and withholding votes for important proxy issues – as a way to influence management and board decisions. In recent years, shareholder activism has once again changed, with the hedge funds emerging as leading the most aggressive activism campaigns.
In corporate America, shareholder activism is greatly hindered by a complexity of legal rules and regulatory systems. According to US federal and state laws, the only way a shareholder can force a firm’s existing managers to pursue alternative strategies or changes in corporate governance, is through
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