Shareholder activism is in the news almost every day. Resistance is appropriate when the activist purely intends to transfer immediate value to the shareholder, at the detriment of the companys attempt to create value over time in other words, when time horizons and risk tolerance differ substantially between the firm and the activist investor. Shareholder activism and institutional investors by stephen m. Sep 07, 2005 in fact, however, institutional investor activism is rare and limited primarily to union and state or local public employee pensions.
Our goal is to create a platform for responsible shareholder activism ensuring the viability and sustainability of companies we coown. Request pdf the evolution of shareholder activism in the united states in the early. My sincere thanks to all of the authors who contributed their expertise, time and labour. The first international law book on shareholder activism for practitioners aims and scope in recent years shareholder activism has increased, becoming a more mainstream way of pressuring companies to effect certain changes to maximize shareholder value. In a study on the history of shareholder activism in the united states, gillan and. The activist revolution no recent development has influenced firms strategic and financial decisionmaking as profoundly as the surge in shareholder activism following the global financial crisis. A fairly small stake less than 10% of outstanding shares may be enough to launch a successful campaign. The purpose of this study is to look at the concept of shareholder activism, its history, causes and influence. Boardroom battles and the rise of shareholder activism.
Activist investors have long since outgrown the negative caricatures created by the entertainment industry, as the strategy of activist investing has grown dramatically and become widely accepted as a welcome means of creating shareholder value. By organizing the book chronologically it allows the author to give a historical perspective of the changes in activism over the last ninety years. Since 2012, activist insight has provided its diverse range of clients with the most comprehensive information on shareholder activism worldwide. Credit suissetremont hedge fund index, one for the history books. The history of shareholder activism from ben graham to dan loeb by rupert hargreaves today, activist investors split opinions. A shareholder activist is a person, who attempts to use his or her rights as a shareholder of a publiclytraded corporation to. We begin by developing a brief history of the concept. Boardroom battles and the rise of shareholder activism kindle edition by jeff gramm. On the rule and its history, see report and recommendations of the. Union pension funds are argued to be more concerned with. This book analyses and compares the benefits and drawbacks of shareholder activism in corporations under us american and german law, applying means of new institutional economics. It refers to both actual and potential governance strategies. Activist investor bill ackman says this book explains his firms biggest deal ever.
The history and evolution of shareholder activism valuewalk. What is shareholder activism and how can business best handle. Shareholder activism and institutional investors by. Boards of directors, management and the markets have increasingly become more attuned to shareholder activism, and engaging with investors is a priority for boards and management as a hallmark of basic good governance. Shareholder activism at the dutch east india company 1622. We analyzed historical patterns of shareholder activism, in the 1980s. This is a quote from the introduction to the doctoral thesis of max steiger 2000 on the impact of institutional investors on corporate governance.
To a large extent, activism is a debate about capital deployment, risk tolerance, and performancetopics that are typically part of managements and the boards agenda in the normal course of business. The evolution of shareholder activism in the united states request. The man behind the activist investor, michael levin, offers a novel incremental premise to. In recent years shareholder activism has increased, becoming a more. Valuewalk the history of shareholder activism from ben. Logically organized into six essential parts, shareholder activism handbook delivers everything you need to represent the rights of shareholders as they attempt to influence corporate direction. This book introduces a new concept called shareholderdriven corporate governance, or scg. This post provides a summary of certain principles of english law and uk and european regulation applicable to uklisted public companies and their shareholders that may affect shareholder activism, namely i stakebuilding, ii shareholders rights to require companies to hold general meetings, iii shareholders rights to propose resolutions at annual general meetings and iv recent. Apr 07, 2015 the purpose of this post is to provide an overview of activism along this spectrum.
Shareholderdriven corporate governance by anita anand ssrn. Yet, as this handbook shows, there have been major shifts in capital market structure that require a reassessment of the role and power of shareholders. As a result, institutional investor activism has not and cannot prove a panacea for the pathologies of corporate governance. The company has a low market value relative to book. This history suggests that shareholder activism and acquisitions are imperfect substitute mechanisms to discipline managers and change corporate policy. Shareholder activism reports activist insight shareholder. Today, they assert their power as a companys owners in many waysfrom selling their shares to private or public communication with management and the board, from press campaigns to blogging, from openly talking to other shareholders to putting forward shareholder. The history and evolution of shareholder activism published on feb 24, 2016 feb. Pdf the past, present and future of shareholder activism by. This shareholder activism manual is designed to assist public companies and their boards of directors, policymakers and other interested parties in better understanding the many facets of shareholder activism.
Oct 09, 2018 this book introduces a new concept called shareholderdriven corporate governance, or scg. Introduction shareholder activism has not played an important role in germany so far. At the most assertive end of the spectrum is hedge fund activism, when an investor, usually a hedge fund or other investor aligned with a hedge fund, seeks to effect a significant change in the companys strategy. Shareholder activism at the dutch east india company 1622 1625. Shareholder activism in india the genesis of shareholder activism in india can be traced back to early 2010 when sebi came up with a mandatory requirement for domestic mutual funds to disclose their voting policies as well as voting actions at. The study will also look at the types of shareholders in a company and their role in shareholder activism. Regularly quoted in the major financial press, activist insight is the trusted source for data in this evolving space. That was the underlying question addressed by last weeks svdx rock center for corporate governance joint event shareholder activism. Dec 10, 2015 the history of shareholder activism from ben graham to dan loeb by rupert hargreaves today, activist investors split opinions. A shareholder activist is a person, who attempts to use his or her rights as a shareholder of a publiclytraded corporation to bring about change within or for the corporation. Since shareholders could vote, activism has existed. The shareholder activist is a network that empowers investors to exercise their rights as equity stakeholders.
A couple weeks ago i had the chance to listen to hedge fund manager jeff gramm give a speech about his book dear chairman. Many believe that activists are only in it for the money and look for. In case after case, activists are increasingly trying to gain board inuence by nominating their own directors, a practice that has been bolstered legislatively by the passage of proxy access. An alternate but not mutually exclusive view, however, is that shareholder activism facilitates the acquisitions market. Will berkshire hathaway eventually get broken up by. Gramm details the history of shareholder activism using case studies of some. A case for shareholders fiduciary duties in common law asia. Smith abstract this study examines firm characteristics that lead to shareholder activism and analyzes the effects of activism on target firm governance structure, shareholder wealth, and operating performance for the 51 firms targeted by calpers over the 198793. When shareholder activism goes too far the new yorker. It is argued that the new high technology world has significantly reduced the.
This chapter examines the phenomenon of shareholder activism within the. Directors prepare for shareholder activism corporate governance. Activists, however, have board composition in their crosshairs. Shareholder activism on the part of hedge funds has, over the past decade, played an increasingly important, and highprofile, role in the market. The shareholder activism in india can be tracked down in the year of early 2010 when there was a mandatory requirement done by sebi related to the disclosing of voting policies related to domestic mutual funds as well as voting actions on an annual basis. Activist insight has observed another busy year for shareholder activism in 2012 which saw a number of high profile activist situations, some new players emerge in the world of activism and the winding down of two activist funds.
How should directors prepare for shareholder activism. In the year of 2010, india started its first proxy and advisory services company. Use features like bookmarks, note taking and highlighting while reading dear chairman. The overall number of new activist investments made by the top. In fact, however, institutional investor activism is rare and limited primarily to union and state or local public employee pensions. Since that time, shareholder activists have used the proxy process, and other. Jan 28, 2016 how should directors prepare for shareholder activism.
What is shareholder activism and how should businesses respond. Shareholder activism in india ingovern institutional. What is shareholder activism and how can business best. Much of the history of corporate law has concerned itself not with shareholder power, but rather with its absence. Will berkshire hathaway eventually get broken up by activists. This chapter examines the phenomenon of shareholder activism within the context of corporate governance and its place in todays debate on shareholders and shareholder empowerment.
In the last 3 decades, individual and institutional shareholders found their voice. Mixing neverbeforepublished and rare, original letters from wall street iconsincluding benjamin graham, warren buffett, ross perot, carl icahn, and daniel loebwith masterful scholarship and professional insight, dear chairman traces the rise in shareholder activism from the 1920s to today, and provides an invaluable and unprecedented. Vignette after vignette of illuminating case studies drive home the point that corporate governance is both gray and complex. An activist shareholder is a shareholder that uses an equity stake in a corporation to put pressure on its management. New age of shareholder activism deep blue university of michigan.
Furthermore, the purpose is to look at the role played by the media in influencing shareholder activism. Feb 27, 2016 the history and evolution of shareholder activism published on feb 24, 2016 feb. I began reading on my train ride, page by page, i found i couldnt put this book down, as author jeff gramm explained about the background and purposes of these letters i was intrigued and fascinated. One of the keys to being prepared for activists is to understand what theyre doing and why. I thought shareholder activism is a boring topic, and didnt expecting much about the book. In comparison, a full takeover bid is a much more costly and difficult undertaking. Pages in category activism by issue the following 7 pages are in this category, out of 7 total. A sharp and illuminating history of shareholder activism in the united states, dear chairman has been praised as a terrific read by andrew ross sorkin in the new york times, a revelation by the financial times, a grand story by the wall street journal, and an engaging and informative book by the new yorker. The purpose of this post is to provide an overview of activism along this spectrum. Nov 29, 2016 a new strategy for shareholder activism. Shareholder returns historical barriers factors supporting shareholder activism and investor engagement greater focus on corporate governance with the launch of japans corporate governance code in 2014 greater scrutiny of companies generating low returns on capital andor trading at low priceto book multiples reduction in companies. Jun 22, 2016 a couple weeks ago i had the chance to listen to hedge fund manager jeff gramm give a speech about his book dear chairman. Directors prepare for shareholder activism corporate. The history and evolution of shareholder activism youtube.
The analysis concentrates on three fields of action of active shareholders in targeted corporations. This term refers to an approach to understanding the corporation that seeks to protect shareholders interests while also affirming their involvement in governance. Shareholder activism is a broad term used to describe various shareholder efforts to influence. Resistance is appropriate when the activist purely intends to transfer immediate value to the shareholder, at the detriment of.
101 499 830 1446 23 127 1064 1065 937 533 1216 586 759 497 62 1155 877 204 781 857 1362 834 1205 521 48 741 870 810 520 919 1495 527 1476 1030 161 990 443 543 474 1041 1240 700 285 1128