Activist shareholder

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An activist shareholder is a shareholder that uses an equity stake in a corporation to put pressure on its management.[1] 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. The goals of activist shareholders 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.).[2] According to research firm Activist Insight, a total of 922 listed companies globally were publicly subjected to activist demands in 2018, up from 856 in 2017.[3] 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.

The financial form of shareholder activism has gained popularity as management compensation at publicly traded companies and cash balances on corporate balance sheets have risen. Not only are the aggregate dollars invested in the activist asset class continuing to grow, but activists are also generating significant positive attention from mainstream media by taking more sophisticated approaches to identifying their platforms and running their campaigns.[4] Once derided as corporate raiders, shareholder activists are now the recipients of admiration for sparking change in corporate boardrooms, leading to corporate boards developing best practices for responding to shareholder activism.[5] Activists increasingly are transitioning from outside agitators to influential insiders. In fact, some well-established activists were able to secure board seats without running a proxy contest in 2015.[6]

Shareholder activists are making their mark on M&A activity as well – a 2015 survey of corporate development leaders found that 60% of respondents saw shareholder activism affecting transaction activity in their industry.[7] Increasingly, however, the non-financial form of shareholder activism is affecting companies in a range of sectors. Shareholders, often with a comparatively small stake in a company, are seeking to influence the company's environmental and social performance.[8]

Some of the recent activist investment funds include: California Public Employees' Retirement System (CalPERS),[9] Icahn Management LP, Santa Monica Partners Opportunity Fund LP, State Board of Administration of Florida (SBA),[10][11][12][13] 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/Verizon merger.


Replica of an East Indiaman of the Dutch East India Company/United East Indies Company (VOC).

The practice of shareholder activism has its roots in the 17th-century Dutch Republic, with pioneering activist shareholders like Isaac Le Maire, a sizeable shareholder of the Dutch East India Company (VOC).[14][15][16][17][18][19]

Notable investors[edit]

During the 1980s, activist investors such as Carl Icahn and T. Boone Pickens gained international notoriety[citation needed] 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.[citation needed]

Activist investor Phillip Goldstein describes the role of an activist investor as that of a catalyst unlocking value in an underlying security, and says that the public perception of activist investors as "corporate raiders" has dissipated.[20]

Notable activist investors include: Isaac Le Maire (1558–1624),[14] Carl Icahn,[21] Nelson Peltz,[21] Bill Ackman,[21] Daniel Loeb,[21] Barry Rosenstein,[21] Alexey Navalny,[21] and T. Boone Pickens, Jr.[citation needed]


In the United States, acquisition of over 5% of beneficial ownership in a company with the intention to influence leadership must be accompanied by a Schedule 13D filing; investors who do not intend to become activists may file a Schedule 13G instead.[22]

Notable scholarship[edit]

New research published at The University of Oxford revisits the assumption that all shareholder activism is the same, characterizing Bill Ackman's activities with Canadian Pacific Railway as paradigmatic of "engaged activism" – which is longer term in nature with correlated benefits to the real economy, as distinct from shorter term "financial activism".[23]


Taking an activist approach to public investing may produce returns in excess of those likely to be achieved passively. A 2012 study by Activist Insight showed that the mean annual net return of over 40 activist-focused hedge funds had consistently outperformed the MSCI world index in the years following the global financial crisis in 2008.[24] Activist investing was the top-performing strategy among hedge funds in 2013, with such firms returning, on average, 16.6% while other hedge funds returned 9.5%.[25]

Socially responsible investing[edit]

Organizations such as the Interfaith Center on Corporate Responsibility (ICCR), As You Sow and Ceres use shareholder resolutions, and other means of pressure, to address issues such as sustainability and human rights.


Shareholder activism directed at both European and American companies has been surging.[26] Numerous[which?] studies try to examine firm characteristics that lead to shareholder activism.[citation needed] A seminal[dubious ][citation needed] work in the field was brought forward by Michael Smith in 1996 in an article published in the Journal of Finance.[27] Researchers also try to understand what makes company a desirable target for an activist investor.[28] Lately,[when?] both scholars and practitioners started using machine learning methodologies to predict both targets and activists.[29]

See also[edit]


  1. ^ Reasonable Investor(s), Boston University Law Review, available at:
  2. ^ "Activist Investor Definition". Carried Interest. Retrieved 17 July 2015.
  3. ^ "The Activist Investing Annual Review 2019".
  4. ^ Grossman, Richard; Arcano, Stephen. "Navigating Today's Shareholder Activism Landscape". Transaction Advisors. ISSN 2329-9134. Archived from the original on 2014-11-08.
  5. ^ Golden, Peter; Richter, Philip; Schwenkel, Robert; Shine, David; Sorkin, John; Weinstein, Gail. "Shareholder Activism in M&A". Transaction Advisors. ISSN 2329-9134. Archived from the original on 2014-11-09.
  6. ^ Gerber, Marc. "US Corporate Governance: Have We Crossed the Rubicon". Transaction Advisors. ISSN 2329-9134. Archived from the original on 2016-06-05.
  7. ^ Ruggeri, Chris; Kirschner, Ken; Blanchard, Tony. "Corporate Development Strategy: Thriving in your Business Ecosystem". Transaction Advisors. ISSN 2329-9134. Archived from the original on 2017-02-02.
  8. ^ Cundill, Gary (2017). "Non-financial shareholder activism: a process model for influencing corporate environmental and social performance". International Journal of Management Reviews. 20 (2): 606–626. doi:10.1111/ijmr.12157.
  9. ^ Forbes: "Calpers Votes Against Jamie Dimon, Again" "Archived copy". Archived from the original on 2016-03-04. Retrieved 2017-08-23.CS1 maint: archived copy as title (link). Retrieved June 28, 2013.
  10. ^ Eric, Finseth (2011). "Shareholder Activism by Public Pension. Funds and the Rights of Dissenting. Employees under the First Amendment" (PDF). Harvard Journal of Law & Public Policy. 34 (1): 289–366. Retrieved 28 June 2013.[permanent dead link]
  11. ^ "FLORIDA SBA" "Archived copy". Archived from the original on 2013-05-11. Retrieved 2013-06-28.CS1 maint: archived copy as title (link) Retrieved June 28, 2013.
  12. ^ State Board of Administration: "SBA Corporate Governance Principles & Proxy Voting Guidelines" [1][permanent dead link] Retrieved June 28, 2013.
  13. ^ Harvard Law School Forum on Corporate Governance and Financial Regulation: "Florida SBA Supports Proxy Access and Advisory Firm Transparency" "Archived copy". Archived from the original on 2014-08-01. Retrieved 2013-06-28.CS1 maint: archived copy as title (link) Retrieved June 28, 2013.
  14. ^ a b Frentrop, Paul (2009). The First Known Shareholder Activist: The Colorful Life and Times of Isaac le Maire (1559–1624), in Frentrop/Jonker/Davis 2009, 11–26
  15. ^ Frentrop, Paul; Jonker, Joost; Davis, S. (ed.), (2009). Shareholder Rights at 400: Commemorating Isaac Le Maire and the First Recorded Expression of Investor Advocacy (The Hague: Remix Business Communications, 2009)
  16. ^ Gelderblom, Oscar; De Jong, Abe; Jonker, Joost (2010). Putting Le Maire into Perspective: Business Organization and the Evolution of Corporate Governance in the Dutch Republic, 1590–1610, in J. Koppell, ed., Origins of Shareholder Advocacy. (New York: Palgrave Macmillan)
  17. ^ McRitchie, James (6 Oct 2011). "Will UNFI Go Virtual-Only Again? Not if Shareowners Just Say No". Archived from the original on 2016-06-25. Retrieved 28 Dec 2016.
  18. ^ Mueller, Dennis C. (ed.), (2012). The Oxford Handbook of Capitalism, p. 333. (New York: Oxford University Press)
  19. ^ Hansmann, Henry; Pargendler, Mariana (2013). The Evolution of Shareholder Voting Rights: Separation of Ownership and Consumption. (Yale Law Journal, Vol. 123, pp. 100–165, 2014)
  20. ^ "Phil Goldstein: The Bulldog's passion for value investing". Opalesque TV. 21 Jan 2011. Retrieved 15 Jul 2018.
  21. ^ a b c d e f Carried Interest: "Activist Investors". Retrieved 6 May 2015.
  22. ^ Reiff, Nathan. "13F Instead of 13D: Activists Make Smaller Purchases". Investopedia. Retrieved 2019-06-03.
  23. ^ Rojas, Claudio. "Eclipse of the Public Corporation Revisited: Concentrated Equity Ownership Theory". The University of Oxford. Archived from the original on July 28, 2017. Retrieved June 27, 2017. ("A common misconception, that all shareholder activists are focused on short-term returns, is rooted in an antiquated phase in US capital markets history – particularly, the highly opportunistic transactions of 1980’s ‘corporate raiders’. In recent years, however, shareholder activism has noticeably shifted towards longer-term value creation."
  24. ^ Activist Insight: "New Shareholder Activist Index Reveals Rewards of Activist Investing" "Archived copy" (PDF). Archived (PDF) from the original on 2015-06-23. Retrieved 2012-12-12.CS1 maint: archived copy as title (link). Retrieved December 12, 2012.
  25. ^ Wood, John; Dysart, Theodore. "Assessing the Merits of an Activist Investor's Point of View". Transaction Advisors. ISSN 2329-9134. Archived from the original on 2015-07-23.
  26. ^ "20 Places You Should be Sharing Your Content". 2018-06-14.
  27. ^ Smith, Michael P. (1996). "Shareholder Activism by Institutional Investors: Evidence from CalPERS". The Journal of Finance. 51: 227–252. doi:10.1111/j.1540-6261.1996.tb05208.x.
  28. ^ Logsdon, Jeanne M.; Van Buren, Harry J. (2008). "Justice and Large Corporations". Business & Society. 47 (4): 523–548. doi:10.1177/0007650308316524.
  29. ^ "Shareholder Activism: Wir sagen voraus wen es trifft!".

Further reading[edit]