Paula Loop is Leader, Catherine Bromilow is Partner, and Leah Malone is Director of the Governance Insight Center at PricewaterhouseCoopers LLP. This post is based on a PwC publication by Ms. Loop, Ms. Bromilow, and Ms. Malone. Related research from the Program on Corporate Governance includes Dancing with Activists by Lucian Bebchuk, Alon Brav, Wei Jiang, and Thomas Keusch (discussed on the Forum here); Who Bleeds When the Wolves Bite? A Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange Corporate Governance System by Leo E. Strine, Jr. (discussed on the Forum here); and The Long-Term Effects of Hedge Fund Activism by Lucian Bebchuk, Alon Brav, and Wei Jiang (discussed on the Forum here).
Activism is about driving change. Shareholders turn to it when they think management isn’t maximizing a company’s potential. Activism can include anything from a full-blown proxy contest that seeks to replace the entire board, to shareholder proposals asking for policy changes or disclosure on some issue. In other cases, shareholders want to meet with a company’s executives or directors to discuss their concerns and urge action. The form activism takes often depends on the type of investor and what they want.
Institutional investors and hedge funds typically have the most impact. Individual investors may submit lots of shareholder proposals, but they usually lack the backing to drive real change.
To prepare for—and possibly to even avoid—shareholder activism, companies and their directors need to understand today’s landscape. Who are the activists? What are they are trying to achieve? When are activists more likely to approach a company? What tactics do they use? We break down the answers by the two main types of investors. Read on.
