Shareholder Activism
AdvancedShareholder activism is when shareholders use their ownership rights to push a company to make changes, such as in strategy, management, governance, capital allocation or environmental and social practices.
Activist shareholders believe a company could be run better, and they seek to influence it rather than simply selling their shares.
Activist approaches range from private discussions with management to public campaigns, submitting shareholder proposals, nominating candidates for the board and, in some cases, proxy fights to replace directors. Activist hedge funds often buy significant stakes in companies they believe are undervalued, then push for changes such as selling divisions, returning cash to shareholders, cutting costs or replacing executives.
For example, an activist investor might buy 5% of a conglomerate's shares and publicly argue that spinning off an underperforming division would unlock value.
Other activists focus on environmental, social or governance issues, such as climate policies or board diversity, and include pension funds and other long-term investors. Supporters argue activism improves accountability and performance. Critics argue some activists focus on short-term gains at the expense of long-term investment.
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