The Effect of Shareholder Activism on Corporate Strategy
SHAREHOLDER ACTIVIST CAMPAIGNS HAVE RISEN PRECIPITOUSLY OVER THE PAST FEW YEARS, fueled by a robust M&A environment, increased economic pressure, and a change in the investor base of most companies. Across the corporate and political spectrum, there are strong advocates for activism; there are also those with equally staunch beliefs that activists distract the work of the board and destruct shareholder value. No matter the lens, most agree activists have changed their approach from “predatory” to “prepared”—often utilizing their vast resources to provide compelling rationale backed by thorough and complex analytics.
At a recent shareholder engagement roundtable comprising corporate executives, board members, investors, and advisers—convened by NYSE Governance Services as part of its Future of Responsibility, Governance, and Ethics (FORGE) initiative—some participants declared their belief that activism has evolved as a practice that is creating companies with better governance and increased value for shareholders, while others emphasized the short-term focus of many activists, which can cause a negative impact on long-term investment and employment, as well as the risk of overleveraging the company.
To better understand the issues and gain broader insight and perspective on the state of shareholder activism, we took to the ﬁeld to survey more than 300 directors of publicly traded US companies. This report presents our ﬁndings.
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