Shareholder activism refers to the way in which certain shareholders assert their power as owners of the company. Activist behaviour is a way for them to influence company management, and can range from dialogue with the company to voice concerns about certain issues, to formal proposals that are voted on at a company's annual general meeting.
Activist shareholder goals
By using an equity stake in a company to put (public) pressure on its management, activist shareholders try to either reach their financial goals, such as increasing shareholder value through changes in corporate policy, financing structure, and cost reduction measures etc. or their non-financial goals, like adoption of environmentally friendly policies, (dis)investments in politically sensitive parts of the world and workers' rights.
It is often seen as a relatively cheap way to exercise rights as a fairly small stake in the company shares outstanding may be enough to launch a successful activist campaign.
Activist shareholder activities
Activism covers a broad spectrum of activities and includes private or public communication with company management, media publicity campaigns and blogging, putting forward shareholder resolutions, proxy battles, litigation, and calling shareholder meetings. Shareholder activism can also refer to investors who attempt to gain control of the company aimed at replacing management in the target companies.
Views on shareholder activism
Activists are generating significant attention from media by taking more sophisticated approaches to identifying their platforms and running their campaigns. Shareholder activists often invoke change in corporate boardrooms. In some cases shareholder activism is directed against other large shareholders, and not against the company or its management.
Shareholder activism is to some extent still considered controversial, as there is disagreement about how much power shareholders should delegate to company boards and when direct shareholder action becomes necessary and on what terms. Also, the nature of activism is changing, as new activism players appear whereas their tactics keep developing.