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By IMD Professor Nuno Fernandes
Activist investors are relatively new – but very influential – players in international capital markets.
Activist investors are shareholders at publicly traded companies who attempt to affect change in an organization either by directly appealing to, or putting heavy pressure on, the company’s board of directors, bypassing the normal advisory process.
The scope of activist investors’ actions varies depending on their assertiveness and on what exactly they seek to change at a given company.
The firms that activists target tend to underperform relative to their industry. Due to activists’ aggressive attitude toward management and hostile approaches to short-term profit making, they are often perceived as "corporate raiders," "green mailers" or "asset strippers".
Types of activism
Hedge fund activism is among the most aggressive and involves shareholders who usually seek a significant change in a company’s strategy, financial structure, management or board composition.
More common, but less conflictual, investor activism consists of shareholders playing a part in deciding how much executives are paid. This is referred to as "say on pay" and originated from concerns about top executives deciding on their own remuneration and overpaying themselves. In the US, "say on pay" was a provision of strong post-financial crisis legislation referred to as Dodd-Frank, which h...................... To view our full article Click here
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