Shareholder Activism : A Policy Of Vigorous Action Essay

Most equity carve-outs do not require shareholder approval and require only approval by the parent company’s and subsidiary company’s boards of directors. More complicated corporate law considerations, particularly those related to fiduciary duties, typically arise following the closing of an equity carve-out, especially if the parent retains a significant equity interest in the subsidiary.

Another challenge for companies when considering social responsibility is the possible negative perception of shareholders. Historically, publicly-owned companies had a primary focus of maximizing shareholder value. Now, they must balance the financial expectations of company owners with the social and environmental

Because corporations are established to profit and shareholders invest money with expectations of a greater return, managers cannot be given a directive to be “socially responsible” without providing specific criteria of checks and balances to which needs to adhere. Therefore, it is imperative to the success of a corporation for managers to not act solely but rather to act within the policies of the shareholders.

Corporate governance is a set of actions used to handle the relationship between stakeholders by determining and controlling the strategic direction and performance of the organization. Corporate governance major concern is making sure that the strategic decisions are effective and that it paves the way towards strategic competitiveness. (Hitt, Ireland, Hoskisson, 2017, p. 310). In today’s corporation, the primary objective of corporate governance is to align top-level manager’s and stakeholders interest. That is why corporate governance is involved when there is a conflict of interest between with the owners, managers, and members of the board of directors (Hitt, Ireland, Hoskisson, 2017, p. 310-311).

Corporate governance in itself has no single definition but common principles which it should follow. For example in 1994 the most agreed term for corporate governance was “the process of supervision and control intended to ensure that the company’s management acts in accordance with the interest of shareholders” (Parkinson, 1994)1. Corporate governance code is not a direct set of rules but a self-regulated framework which businesses choose to follow. This code has continued to change in the past 20 years in accordance with what is happening in the business world. For example the Enron scandal caused reform in corporate governance with the Higgs Report which corrected the issues which were necessary. Although it does not quickly fix problems, it gives a better framework to

Many believe that business entities should have an ethical duty to be socially responsible, to work towards increasing its positive effects on society while decreasing its negative effects. Many organizations look for opportunities to be socially responsible while also creating shareholder wealth.

Shareholder value revolution is a notion described in the book “Liquidated: An Ethnography of Wall Street” by Karen Ho. Shareholder value revolution is a shift of focus of corporations’ managers away from serving the interests of all the constituents of the corporation towards serving the interests solely of a shareholder class. As it was described by Karen Ho, shareholder value revolution came about as a result of the inefficiencies created by the conglomerate wave in the 1960s. These inefficiencies caused the takeover movement in the 1980s that in turn reinforced the interests of shareholders. According to Ho (2009), “In this worldview, corporation exist for the sole benefit of shareholders, and any attempt to separate shareholder interests from those of the corporation was selfish and nonsensical.” (p.

As details of the Enron scandal surfaced public outrage grew, calling for action, accountability and consequences. Corporate governance began receiving renewed interest. Corporate governance is a multi-faceted subject that sets forth the rules and responsibilities of the relationship between the corporation and its stakeholders (Cross & Miller, 2012). This includes the company’s officers and management team, the board of directors, and the organizations shareholders.

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

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

It is often the case that activist shareholders are only interested in the short-term profit; a strategy that is at odds with the interest of the company and the ordinary shareholders.

“positive” change. There has been significant debate whether these activists are truly adding value to

Nevertheless, Friedman pointed out that the profits has taken the firms in to the hand of business intellectuals by which Friedman recommend that the financial system by which the organisation run its business is in the restricted responsibility protection which makes the organisations to privatise their profits (Friedman 1970 pp. 177-184). Friedman also suggested that according to him the shareholder theory in terms of socially responsible can only increase the profit. But on the other hand shareholder theory of Edward Freeman completely support the theory of shareholder towards its role to be socially responsible in the society and maximising the profits for the benefits of shareholders within the firms and society as well (Freeman 2008 pp. 162-165).

According to Dictionary.reference.com, activism is the policy or action of using campaigning to bring about political or social change. A huge campaign that is well known across the world, the Civil Rights Movement, was brought about by Martin Luther King, Jr. King risked his life everyday to ensure justice and equality for the African American race. “Small Change” by Malcolm Gladwell gives insight on how activism is more effective than social media, especially from one scenario at the Woolworth’s lunch counter in Greensboro, North Carolina. Gladwell points out his strong belief of what activism can do for a society rather

Corporate Governance refers to the way a corporation is governed. It is the technique by which companies are directed and managed. It means carrying the business as per the stakeholders’ desires. It is actually conducted by the board of Directors and the concerned committees for the company’s stakeholder’s benefit. It is all about balancing individual and societal goals, as well as, economic and social goals. Corporate Governance is the interaction between various participants (shareholders, board of directors, and company’s management) in shaping corporation’s performance and the way it is proceeding towards. The relationship between the owners and the managers in an organization must be healthy and there should be no conflict between the