Home > Investor Participation, Trends in Corporate Governance > The increase in strategic and operational activism by shareholders.

The increase in strategic and operational activism by shareholders.

Scott Hirst, co-editor at Harvard Law School Forum on Corporate Governance and Financial Regulation, recently published at the HLS blog a post that brought forward the increase in the number and volume of shareholder activist actions connected with strategy or operational matters. (1)

As the author outlines, activism is just one of the features of the transition or rebalance of power from directors and boards, (director-centric model) to shareholders. And, even if a majority of shareholder proposals or interventions might follow their own interests or agendas, there is an increase in the number of actions that are mainly focused on the firm`s agenda, and particularly on operational or strategic matters.

These actions are the result of a relevant investment in research and analysis, so that these investors, even in big market cap firms, risk to invest large amounts of money in the hope that their views on how these companies could be restructured are favored by other investors but mainly understood by boards.

Institutional investors are becoming more at ease when dealing with activism, and more opened to back their views if they make sense; also shareholders are increasingly willing to support the activists proposals when they are voted, which creates a more friendly environment for activist firms; funds are pouring into the hedge fund industry, and activists afford media campaigns and public presentations of their views that have a great impact; boards have a lower level of defense against these “raiders” that they used to have, (removal of poison pills, declassification, and so on), and boards are more willing to listen and cooperate.

This environment is a good one, as boards have an external source for information and ideas for increasing shareholder value; consequently, they would focus on operational and strategic excellence to avoid being the target of these activist campaigns.

For more, please see the article`s link below.

(1)     The Evolving Direction and Increasing Influence of Shareholder Activism, by Scott Hirst, at “The Harvard Law School Forum on Corporate Governance and Financial Regulation.

http://blogs.law.harvard.edu/corpgov/2013/12/23/the-evolving-direction-and-increasing-influence-of-shareholder-activism/

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