Benefits and Drawbacks
B) Introduction to shareholder activism
I) What is shareholder activism?
1) Definition of shareholder activism
Shareholders dissatisfied with the management of a corporation or corporate performance may decide for the “exit” and adopt the “Wall-street-rule” by selling their shares. They may also continue to hold their shares without doing anything, better known as “loyalty.”12 Shareholders who aim to express their dissatisfaction employ a wide range of means lying between the sale of shares and the initiation of takeovers or LBOs.13 In 1972, Hirschmann defined this “voice” option as any attempt to change rather than to escape from an objectionable state of affairs through individual or collective positions to the management directly in charge, appeals to a higher authority with the intention of forcing a change in management, or various types of actions and protests, including those meant to mobilize public opinion.14 Its function is to alert a firm or organization to its failings while giving it some time and the choice to respond to the pressures that have been brought to bear on it,15 depending on the costs of alternatives.16 Nowadays, shareholder activism refers to the interest of shareholders in shaping the direction of their company through their participation in the normal processes that shape the company, such as voting through proxies during a shareholder meeting. At the other extreme lies the popular hedge fund practice of accumulating shareholder minority positions in public companies large enough to move the companies single-handedly in one direction or the other...