Shareholder Activism

Shareholders are interested in how the company is being managed. In case of dissatisfaction about the functionality or performance of the company; they take the reins and monitor the management to ensure that it is managed in the best interests of the company. Shareholders influencing the corporate behavior by exercising their rights as owners are termed as shareholder activism.

Shareholder activism has earned its place in the financial press in the recent times. Internet helps in coordination between different groups and reduces asymmetries of information. Shareholders whose interests are diverse, aided by proxy advisory firms are flexing their muscles in varied ways like proxy requisitions, request for shareholder meetings, proxy fights to influence the behavior of the management. Presence of media acts as a catalyst to activism. The author cites, as examples a number of wins scored by activists in India and abroad. The challenge before corporate is to deal with activism without compromising the fiduciary duty of acting in the best interests of the company but not to specific activist shareholders.