Subscribe Subscribe   Find us on Twitter Follow POL on Twitter  



The increasing influence of activist shareholders

| No Comments

Jarrett Dieterle
Legal Intern, Manhattan Institute's Center for Legal Policy

Activist investors pushing political or idiosyncratic agendas, such as Catholic orders of nuns and individual "corporate gadflies," have existed in one form or another for many years. Traditionally, more value-oriented investors like Carl Icahn and private equity funds exerted influence through proxy fights, hostile takeovers and the like--jump-started in the 1980s and popularized through books and movies like Barbarians at the Gate. Recently, however, procedural shifts in corporate governance won by activists in the shareholder proposal process have enabled professional investors to gain new influence as well. As noted in a recent Wall Street Journal article, gradual changes in corporate governance rules have made it easier for activist investors to gain more leverage in getting their own candidates placed on company boards:

[N]ew corporate-governance rules are shifting that balance, making companies more vulnerable to contests for board seats, while mediocre stock returns are leaving mainstream mutual-fund investors dissatisfied. At the same time, many activists have recruited more-experienced executives to serve on boards, diminishing their image as corporate raiders out solely to make quick buck.

Although shareholder activism is not always aligned with increasing shareholder value, it is important to note that some forms of shareholder activism can be beneficial for shareholders. As Manhattan Institute's Center for Legal Policy Director Jim Copland notes:

Investors like Icahn are unambiguously trying to drive up share value (and have a strong record of doing so), which helps all shareholders. That's why I haven't generally opposed board declassification and majority election of directors; although it facilitates shareholder activism that may be more about extracting corporate value from all shareholders for special interests, it facilitates this "good" shareholder activism, too.

Nowadays more companies hold annual board elections, which give activists more influence than they would have if board terms were staggered and only part of the board could be contested at any one time. Also, large companies often require directors to win a majority of shareholder votes, rather than a mere plurality.

Leave a comment

Once submitted, the comment will first be reviewed by our editors and is not guaranteed to be published. Point of Law editors reserve the right to edit, delete, move, or mark as spam any and all comments. They also have the right to block access to any one or group from commenting or from the entire blog. A comment which does not add to the conversation, runs of on an inappropriate tangent, or kills the conversation may be edited, moved, or deleted.

The views and opinions of those providing comments are those of the author of the comment alone, and even if allowed onto the site do not reflect the opinions of Point of Law bloggers or the Manhattan Institute for Policy Research or any employee thereof. Comments submitted to Point of Law are the sole responsibility of their authors, and the author will take full responsibility for the comment, including any asserted liability for defamation or any other cause of action, and neither the Manhattan Institute nor its insurance carriers will assume responsibility for the comment merely because the Institute has provided the forum for its posting.

Related Entries:



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.