Knowledge (XXG)

Shareholder activism

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36: 470:, a shareholder receives a general vote for however many number of ballot questions there are. The votes can then be all cast for (or against) a single ballot question, which makes it easier for minority shareholders to elect candidates. There has also been a movement toward "majority" voting, where a candidate must receive the majority of votes. Most large corporations are incorporated in Delaware due to the well-developed 2423: 2413: 2403: 2433: 2110: 512:, may submit a shareholder proposal in the United States, and between 1934 and the mid-1980s these shareholders typically submitted proposals. One estimate placed institutional owners at 68% of shares and retail at 32% of shares, but 98% of institutional owners vote and only 28% of retail owners vote. Institutional shareholders, however, often vote automatically upon the advice of 320:" 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. More recently, activist investor 404:
project. Activist hedge funds, which are hedge funds that "take concentrated positions in the equity of public corporations and actively engage with corporate managers" can address the principal-agent problem and limit self-dealing by providing management with high-powered incentives to increase value.
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Historically, investors were required to mail separate ballots when trying to nominate someone of their own to the board, but beginning in 2015, proxy access rules began to spread driven by initiatives from major institutional investors, and as of 2018, 71% of S&P 500 companies had a proxy access
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Shareholder activism directed at both European and American companies has been surging. A 1996 study found that larger firms with higher institutional holdings made firms more likely to be targeted by activist investors. Researchers also try to understand what makes company a desirable target for an
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Corporations in 18th-century Europe were privileged and relatively uncommon, but in the United States became much more common, starting with 300 in the 1790s and expanding by around 26,000 between 1790 and the 1860s, resulting in about 15 times the corporations in Great Britain by 1830. These early
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as well – a 2015 survey of corporate development leaders found that 60% of respondents saw shareholder activism affecting transaction activity in their industry. Increasingly, however, the non-financial form of shareholder activism is affecting companies in a range of sectors. Shareholders, often
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companies. In the 2010s, investments in the activist asset class grew, with activists receiving coverage by the media and positive attention from investors. Activists have typically engaged in adversarial campaigns, but have also in some cases been able to acquire board seats with a formal proxy
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Activist investors are often hedge funds funded by accredited investors and institutions. In 2019, institutions were demanding more upfront explanation of the activist ideas before funding, and in some cases requiring that the funds be placed into special purpose vehicles specifically for the
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had consistently outperformed the MSCI world index in the years following the global financial crisis in 2008. 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%.
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Shareholder activism can be categorized as "offensive" or "defensive"; in the latter case, an existing shareholder attempts to correct some deficiency, while offensive activists build a position with the intention to agitate for change. Shareholders can also initiative a
116:. 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 shareholder activism range from financial (increase of 324:
suggested that the role of the activist investor has moved from green mail to one of being a catalyst to unlock value in an underlying security, and says that the public perception of activist investors as "corporate raiders" has dissipated.
474:; in Delaware, cumulative voting is optional, but exceptions exist; for example, a California-based but Delaware-registered corporation may be "pseudo-foreign" under California law and therefore have to comply with California law. 233:. Activism was likely limited by the lack of ownership dispersion, meaning that many corporations had large shareholders with sizable blocks (10 to 20% of total shares) who already exerted significant control over the corporation. 1832: 1763: 1493: 519:
Various websites have been created to facilitate retail involvement, including Moxy Vote, Shareowners.org, United States Proxy Exchange and ProxyDemocracy.org, but over time these generally shut down.
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Wright, Robert E.; Sylla, Richard (2011), Koppell, Jonathan G S (ed.), "Corporate Governance and Stockholder/Stakeholder Activism in the United States, 1790–1860: New Data and Perspectives",
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As of 2018, there had been an average of 272 activist campaigns per year in the United States, including 47 proxy contests. About 47% of targeted companies were outside of the United States.
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Votes for the board may be "straight" or "cumulative". In straight voting (aka statutory voting), shareholders get one vote per share on all ballot questions (e.g., candidates for the
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From 1900 to 1950, about 1.22 "offensive" activist initiatives occurred per year, with more occurring in the 1940s and 1950s. Notable investors included
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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
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by corporate insiders, although large stockholders can also engage in self-dealing to themselves at the expense of smaller minority shareholders.
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activist investor. Lately, both scholars and practitioners started using machine learning methodologies to predict both targets and activists.
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Harvard Law School Forum on Corporate Governance and Financial Regulation: "Florida SBA Supports Proxy Access and Advisory Firm Transparency"
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Cundill, Gary (2017). "Non-financial shareholder activism: a process model for influencing corporate environmental and social performance".
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Dunlavy, Colleen A. (21 February 2007). "Social Conceptions of the Corporation: Insights from the History of Shareholder Voting Rights".
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Taking an activist approach to public investing may produce returns in excess of those likely to be achieved passively. A 2012 study by
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with a comparatively small stake in a company, are seeking to influence the company's environmental and social performance.
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often engage in shareholder proposals. The Shareholder Rights Group is a coalition of shareholder proposal advocates.
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use shareholder resolutions, and other means of pressure, to address issues such as sustainability and human rights.
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Activist investors advertise their message out in various ways including postal mail, websites, and social media.
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Fisch, Jill E. (2017). "Standing Voting Instructions: Empowering the Excluded Retail Investor". Rochester, NY.
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Due to the Internet, smaller shareholders have also gained an outlet to voice their opinions. In 2005, small
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Coyle, John F. (25 January 2016). "Altering Rules, Cumulative Voting, and Venture Capital". Rochester, NY.
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where the management (agents) do not adequately respond to the wishes of the principals (investors) of
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Smith, Michael P. (1996). "Shareholder Activism by Institutional Investors: Evidence from CalPERS".
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State Board of Administration: "SBA Corporate Governance Principles & Proxy Voting Guidelines"
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Golden, Peter; Richter, Philip; Schwenkel, Robert; Shine, David; Sorkin, John; Weinstein, Gail.
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investors such as mutual funds play a significant role in corporate governance. These firms use
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The First Known Shareholder Activist: The Colorful Life and Times of Isaac le Maire (1559–1624)
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Gregory, Holly J.; Grapsas, Rebecca; Holl, Claire; LLP, Sidley Austin; on (February 2019).
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Activist Insight: "New Shareholder Activist Index Reveals Rewards of Activist Investing"
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For an analysis of the hundreds of annual shareholder resolutions, see Proxy Preview.
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Logsdon, Jeanne M.; Van Buren, Harry J. (2008). "Justice and Large Corporations".
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shareholders created an online petition to protest the MCI/Verizon merger.
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Qwest Withdraws from Bidding – Denver Business Journal / MCIpetition.com
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to force action by the corporation. Shareholders can also engage in a
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Reasonable Investor(s), Boston University Law Review, available at:
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to receive recommendations on how to vote on shareholder proposals.
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from particular countries, etc.). Shareholder activists can address
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showed that the mean annual net return of over 40 activist-focused
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filing; investors who do not intend to become activists may file a
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gained international notoriety and were often perceived as "
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Third Point Management's letter to Star Gas CEO, Irik Sevin
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Icahn calls for Time Warner breakup, buyback / CNNMoney.com
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International Development, Community and Environment (IDCE)
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Hirst, Scott; Bebchuk, Lucian; Cohen, Alma (1 July 2017).
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the Interfaith Center on Corporate Responsibility (ICCR)
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Predicting Shareholder Activist Targets, Nordantech.com
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Labor unions, including through pension funds such as
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but these are typically not associated with activism.
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Some of the recent activist investment funds include:
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As of 2020, passive investors such as index funds by
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Shareholder activism can take any of several forms:
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Shareholders Have a Tool for That" 1336:"The Agency Problems of Institutional Investors" 143:, litigation, and negotiations with management. 351:Examples of activist investors in Asia include 166:Shareholder activists are making their mark on 27:Shareholder using equity to pressure management 1565:"20 Places You Should be Sharing Your Content" 206:corporations contained various provisions for 176:California Public Employees' Retirement System 1923: 1142:Chung, Juliet; Benoit, David (14 July 2017). 508:Any shareholder, including non-institutional 328:In 2019, notable activist investors included 308:During the 1980s, activist investors such as 182:, Santa Monica Partners Opportunity Fund LP, 43:The examples and perspective in this article 8: 2407:Alternative investment management companies 2384:Standards Board for Alternative Investments 1279:"The Activist Investing Annual Review 2019" 843:International Journal of Management Reviews 689:, Palgrave Macmillan US, pp. 231–251, 2432: 2288:Taxation of private equity and hedge funds 2164: 1951: 1930: 1916: 1908: 1454:"Majority Voting for Directors | Insights" 929:Harvard Journal of Law & Public Policy 888:"Calpers Votes Against Jamie Dimon, Again" 1351: 862: 81:Learn how and when to remove this message 184:State Board of Administration of Florida 615: 1736: 1725: 1517:: CS1 maint: archived copy as title ( 1510: 1432: 1421: 1080:Carried Interest: "Activist Investors" 1061:, in Frentrop/Jonker/Davis 2009, 11–26 1988:fixed-income relative-value investing 1785:Morgenson, Gretchen (24 March 2017). 1678: 1676: 1674: 1659:from the original on 16 November 2018 1571:from the original on 16 November 2018 1448: 1446: 1123:from the original on 29 December 2019 1101: 1099: 1097: 1095: 1075: 1073: 1071: 1069: 1067: 830:from the original on 2 February 2017. 768:from the original on 9 November 2014. 737:from the original on 8 November 2014. 348:had begun to show signs of activism. 120:through changes in corporate policy, 7: 1360:from the original on 6 November 2020 717:Grossman, Richard; Arcano, Stephen. 680: 678: 676: 674: 672: 670: 668: 241:Notable activist investors include: 1391:from the original on 29 August 2019 1252:Barnes, Oliver (October 15, 2023). 963:"ProxyDemocracy | Florida SBA" 449:Proxy statement § Proxy access 1835:from the original on 19 March 2020 1805:from the original on 19 March 2020 1766:from the original on 19 March 2020 1695:from the original on 19 March 2020 1604:10.1111/j.1540-6261.1996.tb05208.x 1553:from the original on 23 July 2015. 1466:from the original on 19 March 2020 1009:from the original on 1 August 2014 960:ProxyDemocracy.org: "FLORIDA SBA" 393:Institutional Shareholder Services 383:as well as non-activist but still 25: 1754:Levick, Richard (25 April 2011). 1499:from the original on 23 June 2015 1150:from the original on 17 July 2020 900:from the original on 4 March 2016 799:from the original on 5 June 2016. 750:"Shareholder Activism in M&A" 653:from the original on 25 June 2019 154:Activism may help to address the 2431: 2422: 2421: 2412: 2411: 2402: 2401: 2108: 1340:Journal of Economic Perspectives 1315:from the original on 7 July 2020 1293:from the original on 9 May 2019. 1233:from the original on 31 May 2019 1203:from the original on 6 July 2018 624:http://ssrn.com/abstract=2579510 472:Delaware General Corporation Law 344:. In 2019, mutual funds such as 34: 687:Origins of Shareholder Advocacy 585:Corporate social responsibility 523:Political and labor involvement 1533:Wood, John; Dysart, Theodore. 643:"Activist Investor Definition" 604:Socially responsible investing 539:Socially responsible investing 466:or shareholder proposals). In 219:Phoenix Securities Corporation 1: 1523:. Retrieved 12 December 2012. 1032:Washington and Lee Law Review 346:Wellington Management Company 2473:Shareholder-rights activists 2262:security characteristic line 1683:Miller, Robin (1 May 2016). 1381:"The Latest on Proxy Access" 935:(1): 289–366. Archived from 2250:Capital asset pricing model 1969:Capital structure arbitrage 1889:(archived 27 December 2013) 1887:Academic Literature Summary 57:, discuss the issue on the 2489: 2052:Commodity trading advisors 446: 410:Offensive versus defensive 124:, etc.) to non-financial ( 2397: 2389:Managed Funds Association 2333:High-net-worth individual 2106: 910:. 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Index

Shareholder activist
worldwide view
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activism
shareholders
equity
corporation
management
shareholder value
cost cutting
disinvestment
self-dealing
proxy battles
shareholder resolutions
Daniel Loeb
Third Point Management
principal-agent problem
publicly traded
mergers and acquisitions
California Public Employees' Retirement System
Icahn Management LP
State Board of Administration of Florida
Relational Investors, LLC
MCI Inc.
corporate governance
Cyrus S. Eaton
Phoenix Securities Corporation

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