Hedge Fund Activism
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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Who doesn't want to make money? Everyone right? An American Hedge Fund is a great read for all those who want to be successful in life because it shows you how to think smarter, along with what is achievable with money (which is the most important thing on earth). This book, written by Timothy Sykes, shows the ease of becoming a self made millionaire, if you are motivated to do so. Timothy Sykes began his millionaire conquest at the age of 14 where he gained interest in the stock market. By his freshman year in college he figured out a way to determine a pattern for stocks fluctuating prices. His pattern allowed him to buy and sell stocks making huge gains and minimal loses. After his new profound wealth, it made him realize, “for better or
Icahn’s article was published in Wall Street Journal in 2009 with a title “The Economy Need Governance Reform.” In this article, Icahn takes a partially similar direction of argument by blaming the greed and irresponsibility. Icahn aims to propose a more practical argument, he begins by appealing to President’s Obama credibility that we must accept hard choices and take responsibility for incorrect decisions. Icahn implies that it is wrong for the government to “subsidize managers that lead their companies into trouble”. Icahn than uses a slippery slope to support the conclusion that enhanced public companies regulation will enable better control and prevention of risky decisions. The slippery slope is reached when Icahn claims manager to be “irresponsible and self-driven” and that their compensation is overvalued, thus the economy failed… Icahn concludes his argument with the following reason, “this change will empower shareholders to exert more influence on management decisions.” (Icahn
The plaintiffs have been left to clean up the wreckage of the investment portfolios. Trust has been lost with feeder investors, and the general public has been more cautious. More oversight and laws have been established to protect investors. While several investors in feeder funds have not been paid ongoing litigation is still taking place over six years later (Chon,
Activist investing is the attempt of an individual or group to purchase a large number of company shares with the goal of implementing change within that company. Activist Investors can be anyone with enough capital to buy enough shares of a company to become a major stakeholder, such as a wealthy individual or a private equity firm. A company can become a target of activist investing for several reasons, such as: the company is being mismanaged, has excessive cost, the activist believe they can make the company more valuable or even the activist is just generally dissatisfied with the company. An indication that a company has become the target of activist investing is the filing of SEC Form 13D, which
A good and successful activist reform would result in the long-term value creation for the target company, which would benefit both the shareholders and the bondholders. The activist reform would motivate management to achieve operating efficiencies, which would improve cash flows and generate better returns for both the shareholders and bondholders. In conclusion, I find the objections to the strategies of activists raised by the managers of Commonwealth REIT and other companies in the article vague. However, the managers need to distinguish between the activists looking for short-term profits and the activists looking for a long-term value creation. The former might destroy some value in the process so the managers need to fend off those attacks.
Categorized by the natures, shareholders are recognized as the banks, trusts, insurance companies, private equity fund, public pension funds, religious groups, worker unions or a unique individual who is a natural person. They can be divided into the majority or minority shareholders, institutional or individual shareholder based on the group sizes and functions. The majority or institutional shareholders are continually believed to play an unprecedented role in corporate governance. King (2009) believes one of the major reasons for market failures connecting with governance is due to the absence of institutional shareholders. From the view of the sponsor’s motivations, the shareholders are financial activists who focus on the firm’s performance and social activists who pay more attention to corporate social responsibilities. Within the limit of this research, we differentiate the sponsors population into two distinct groups: the gadfly group that represent for all hyperactive individual shareholders and the other shareholder groups which include all other remain shareholder
The topic of activist hedge funds, and the freedom in which they are allowed to target companies has risen a lot of concern amongst politicians, CEOs and the American public. Thus, the proposed rule has attracted a lot of attention and many comments, either for or against the rule.
The number one problem effecting shareholders is the collective action problem. This problem can be lessened through the use of proxies, but there are numerous federal proxy rules that must be followed, There are four major elements to these federal proxy rules. (1) Disclosure requirements and a mandatory vetting regime that permit the SEC to assure the disclosure of relevant information and to protect shareholders from misleading communication, (2) Substantive regulation of the process of soliciting proxies from shareholders, (3) a specialized “town meeting” provision (Rule 14a-8) that permits shareholders to gain access to the corporation’s proxy materials and to thus gain a low-cost way to promote certain kinds of shareholder resolutions, AND (4) A general anti-fraud provision (Rule 14a-9) that allows courts to imply a private shareholder remedy for false or misleading proxy materials.
Unfortunately, this year also marks the third straight year we report on a hedge fund industry mired in underperformance. However, the woes facing the hedge fund industry are compounded this year, reaching beyond performance, creeping into fund raising and industry expansion. This year is witness to net negative asset flows and actual reductions in the number of hedge fund firms, as firm closures
The hedge fund industry receives a tremendous amount of negative coverage in the mainstream media. This is further exacerbated by political candidates, on both sides of the aisle, who have characterized the federal taxes hedge fund professionals pay to be lower than the taxes paid by truck drivers and secretaries. It is often difficult to discern if this narrative is being driven by the media or by the politicians. Either way, it is patently false.
The instructor may vary the emphasis on different issues by altering the study questions and by the choice of video clips. The case is well suited for courses and classes concerning corporate governance, valuation, mergers and acquisitions, and corporate social responsibility. The following objectives of the case allow students to:
Walmart is considered as the biggest retailer in United State and opening widely to over the world recently. The priority condition for its success firstly is come from the outstanding players of the corporate governance such as Board of directors and Activist Shareholders. These all creative and responsible leaders are required to possess ability for risk-taking willingness and control in order to govern company. In addition, the activist shareholders actively raise their voice in the policies and strategies’ approval. All in all, the excellent corporate governance they made ensures an accountable and integrity system operated.
The basic principal relating to the administration of the affairs of a company is that “the will of the majority is supreme”. The general rule is that the decisions of the majority shareholders in a company bind the minority. 1 In a world that recognizes ‘simple majority rules’, minority shareholders of companies are by default vulnerable to oppression,