Over the last two decades, the corporate governance landscape has become increasingly dominated by the view that maximizing the power and influence of shareholders will lead to stronger and better-governed companies. The widespread dismantling of staggered boards and change-of-control defenses, the promulgation of say-on-pay and other governance mandates, and the proliferation of best practices are largely premised on this shareholder rights manifesto. In the aggregate, the changes have been transformative and have precipitated a sea change in the gestalt of Wall Street. Hedge fund activism has exploded as an asset class in its own right, and even the largest and most successful companies are vulnerable to proxy fights and other activist campaigns. In response to short-termist pressures brought by hedge funds and activist shareholders, companies have been fundamentally altering their business strategies to forego long-term investments in favor of stock buybacks, dividends and other near-term capital returns. At this point, theoretical debates about the pros and cons of a shareholder-centric governance model have been superseded by observable, quantifiable trends and behaviors. For example, according to Standard & Poor’s, dividends and stock buybacks in the U.S. totaled more than $900 billion in 2014—the highest level on record, and last December, a Conference Board presentation compiled data demonstrating that capital investment by U.S. public companies has decreased and is less than that of private companies.

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