Activist shareholder
Encyclopedia
An activist shareholder uses an equity stake in a corporation
to put public pressure on its management
. The goals of activist shareholder
s range from financial (increase of shareholder value
through changes in corporate policy, financing structure, cost cutting, etc.) to non-financial (disinvestment
from particular countries, adoption of environmentally friendly
policies, etc.). The attraction of shareholder activism lies in its comparative cheapness; a fairly small stake (less than 10% of outstanding shares) may be enough to launch a successful campaign. In comparison, a full takeover bid is a much more costly and difficult undertaking.
Shareholder activism has gained popularity as management compensation at publicly traded companies and cash balances on corporate balance sheet
s have risen.
Shareholder activism can take any of several forms: proxy battles
, publicity campaigns, shareholder resolutions, litigation, and negotiations with management. Daniel Loeb, head of Third Point Management, is notable for his use of sharply written letters directed towards the CEOs of his target companies.
Some of the recent activist investment funds include: Icahn Management LP, Santa Monica Partners Opportunity Fund LP and Relational Investors, LLC.
Due to the Internet, smaller shareholders have also gained an outlet to voice their opinions. In 2005, small MCI Inc shareholders created an online petition to protest the MCI Inc/Verizon merger.
In an Opalesque.TV interview with notable activist investor Philip Goldstein of Bulldog Investors, Goldstein describes the role of an activist investor as that of a catalyst unlocking value in an underlying security. He goes on to say that the public perception of activist investors has changed, and this image of "corporate raiders" has dissipated.
Notable activist investors:
and Ceres
use shareholder resolutions, and other means of pressure, to address issues such as sustainability and human rights.
Pillip Goldstein
Lawrence Goldstein
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
to put public pressure on its management
Management
Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...
. The goals of activist shareholder
Shareholder
A shareholder or stockholder is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders own the stock, but not the corporation itself ....
s range from financial (increase of shareholder value
Shareholder value
Shareholder value is a business term, sometimes phrased as shareholder value maximization or as the shareholder value model, which implies that the ultimate measure of a company's success is the extent to which it enriches shareholders...
through changes in corporate policy, financing structure, cost cutting, etc.) to non-financial (disinvestment
Disinvestment
Disinvestment, sometimes referred to as divestment, refers to the use of a concerted economic boycott, with specific emphasis on liquidating stock, to pressure a government, industry, or company towards a change in policy, or in the case of governments, even regime change...
from particular countries, adoption of environmentally friendly
Environmentalism
Environmentalism is a broad philosophy, ideology and social movement regarding concerns for environmental conservation and improvement of the health of the environment, particularly as the measure for this health seeks to incorporate the concerns of non-human elements...
policies, etc.). The attraction of shareholder activism lies in its comparative cheapness; a fairly small stake (less than 10% of outstanding shares) may be enough to launch a successful campaign. In comparison, a full takeover bid is a much more costly and difficult undertaking.
Shareholder activism has gained popularity as management compensation at publicly traded companies and cash balances on corporate balance sheet
Balance sheet
In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership or a company. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A...
s have risen.
Shareholder activism can take any of several forms: proxy battles
Proxy fight
A proxy fight or proxy battle is an event that may occur when a corporation's stockholders develop opposition to some aspect of the corporate governance, often focusing on directorial and management positions. Corporate activists may attempt to persuade shareholders to use their proxy votes A proxy...
, publicity campaigns, shareholder resolutions, litigation, and negotiations with management. Daniel Loeb, head of Third Point Management, is notable for his use of sharply written letters directed towards the CEOs of his target companies.
Some of the recent activist investment funds include: Icahn Management LP, Santa Monica Partners Opportunity Fund LP and Relational Investors, LLC.
Due to the Internet, smaller shareholders have also gained an outlet to voice their opinions. In 2005, small MCI Inc shareholders created an online petition to protest the MCI Inc/Verizon merger.
Notable activist investors
During the 1980s, notable activist investors such as Carl Icahn and T. Boone Pickens gained international notoriety and were often perceived as "corporate raiders" for acquiring an equity stake in publicly owned companies, like Icahn's investment in B.F. Goodrich, and then forcing companies to take action to improve value or rid themselves of rebel intruders like Icahn by buying back the raider's investment at a fat premium, often at the expense of the other shareholders.In an Opalesque.TV interview with notable activist investor Philip Goldstein of Bulldog Investors, Goldstein describes the role of an activist investor as that of a catalyst unlocking value in an underlying security. He goes on to say that the public perception of activist investors has changed, and this image of "corporate raiders" has dissipated.
Notable activist investors:
- Carl IcahnCarl IcahnCarl Celian Icahn is an American business magnate and investor.-Biography:Icahn was raised in Far Rockaway, Queens, New York City, where he attended Far Rockaway High School. His father was a cantor, his mother was a schoolteacher...
- Daniel Loeb
- Chris Hohn
- Warren LichtensteinWarren LichtensteinWarren G. Lichtenstein is the head of Steel Partners, a hedge fund based in New York City that focuses on deep value and activist investing.....
- Stephen MayneStephen MayneStephen Mayne is an Australian journalist, local government councillor and self-described shareholder activist. Mayne is also considered “serial runner”, continually running for elected office and election onto company boards, more often than not in futile attempts, or just to make political...
- T. Boone Pickens, Jr.T. Boone Pickens, Jr.Thomas Boone Pickens, Jr. , known as T. Boone Pickens, is an American business magnate and financier. Pickens chairs the hedge fund BP Capital Management. He was a well-known takeover operator and corporate raider during the 1980s...
- Sister Patricia Daly
- Philip Goldstein
- Thomas Strobhar
- Theo BothaTheo BothaTheophilous James Bennett Botha is a South African shareholder activist.He has queried many companies in the area of good corporate governance,ethics,executive compensation,environmental practices...
- Barington Capital
- David M WebbDavid Michael WebbDavid Michael Webb , usually known as David Webb, is a well-known activist and share market analyst in Hong Kong. He is a retired Investment Banker, and now devotes much of his time to advocating solutions for better corporate and economic governance in Hong Kong...
Socially responsible investing and shareholder activism
Organizations such as the Interfaith Center on Corporate Responsibility (ICCR)Interfaith Center on Corporate Responsibility
The Interfaith Center on Corporate Responsibility is a coalition of 275 faith-based institutional investors. Founded in 1973, the organization advocates for corporate social responsibility and files shareholder resolutions and engages in dialogue with corporate management on issues such as global...
and Ceres
Ceres (organization)
Ceres is a non-profit, American network of investors, environmental organizations and other public interest groups working with companies and investors to address sustainability challenges, such as global climate change....
use shareholder resolutions, and other means of pressure, to address issues such as sustainability and human rights.
See also
- Socially responsible investingSocially responsible investingSocially responsible investing , also known as sustainable, socially conscious, or ethical investing, describes an investment strategy which seeks to consider both financial return and social good....
- Shareholder rebellionShareholder rebellionShareholder rebellion occurs when the owners of a corporation work to throw out management or oppose their decisions. Shareholder rebellion may occur at a corporate annual meeting or through a proxy battle. Shareholders may also threaten to collapse a firm's stock price through concentrated selling...
- Proxy statementProxy statementA proxy statement is a statement required of a United States firm when soliciting shareholder votes. This statement is filed in advance of the annual meeting. The firm needs to file a proxy statement, otherwise known as a Form DEF 14A , with the U.S. Securities and Exchange Commission...
Pillip Goldstein
Lawrence Goldstein