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Comment: A Novel Perspective on Shareholder Activism

Friday, December 16, 2016

Matthias Knab, Opalesque:

Claudio Rojas of Hurt Capital Inc. writes on Harvest Exchange:

Over the next decade, a common misconception will fade – that all shareholder activism is short-term oriented. This anachronistic view is rooted in an antiquated phase in capital markets history – mainly, highly opportunistic transactions by "corporate raiders" in the 1980’s.[17] For example, research by John Armour (Oxford) and Brian Cheffins (Cambridge), leading scholars in the field of law and economics, distinguishes between two forms of shareholder activism (1) offensive, and (2) defensive.[18] Traditional views of shareholder activism fall within the first. Institutional investors are described as falling within the second[19]. Building upon this research, we define the broad category of "shareholder activism" as containing three distinct sub-categories of participant:

(1) Engaged Activists™ – longer-term, fundamental investors aspiring to capture value through business level decision making. Engaged Activism™ is the active focus on value creation rooted in business fundamentals, as distinct from Financial Activism™. This broad definition includes institutional shareholders, alongside "business builder" activists.[20] Generally, this form of activity contributes meaningfully to expansion in the "real economy", including building or acquiring new technologies, factories, and lines of business, or hiring new management.[21] For example, Pershing Square Capital Management (......................

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