Hedge Fund Activism : Corporate Policy

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Hedge Fund Activism
1. Background
Shareholder activism refers to the active influence on corporate policy and practices through the use of ownership position1. Activism can be advocated by a single minority investor, or large institutional investors with majority stakes in the organization such as mutual funds and pension funds2. The history of shareholder activism can be traced back 80 years ago when a court decision sided with dissident shareholders and reinstated the special dividend that Henry Ford chose to cancel3. Shareholder activism in the United States continues to evolve, expand, and increase in influence since then. In the late 1980s, shareholder activism takes on a more aggressive paradigm through engagement in hostile takeovers and leveraged-buyouts to gain control of undervalued and underperforming companies3. In the 1990s, shareholder activism took on a less aggressive form of activism – favoring abstentions and withholding votes for essential proxy issues – to advocate operational, financial, and governance reforms in a company. The implications from the early landscape of shareholder activism, however, has largely been inconclusive since the period was plagued by many regulatory and structural barriers such as free-rider problems, and conflict of interest4.
In recent years, hedge fund activists have been growing in prominence around the world as a new breed of shareholder activists and the latest form of corporate governance mechanism. Hedge fund activists

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