What Are Activist Investing?

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.

So investors should worry that Alibaba wouldn’t be share a significant amount of the value created with them over the time. Actually, lots of global public companies have a large shareholder with a lock on control, but normally controlling shareholders often won a substantial portion of the equity capital that provides them with beneficial incentives. In the case of Alibaba, investors need to worry about the relatively small stake held by the members of the controlling Alibaba Partnership (Bebchuk, 2014). All those factors shows Alibaba’s structure does not provide adequate protections to public investors. So investors expect Alibaba changes its Corporate Governance strategy, for instance Jack Ma need to reduce his stake in Alibaba within 5 years, including by having shares in Alibaba granted to Alibaba employees. It also should give more power to the shareholder’s to guarantee shareholder’s right which will seeks to allay investor concerns. If Alibaba change their strategy, giving its stockholders’ strong confidence, the business success of Alibaba might be large enough to make up for the costs of diversions and give public investors with good returns on their investment in the

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 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.

only acting in the best interest of the shareholders which is the reason they were hired in the first

The Concise Oxford Dictionary, ninth edition defines the term “activism” as a policy of vigorous action in a cause, especially in politics. From such viewpoint, shareholder activism has its origins in politics. Terms like “activists” and “activism” are commonly used in politics. Hence, shareholder activism can be understood as an intensive action taken by an owner or a person with an interest in a company. Another definition from Wikipedia mentions that activist shareholders use an equity stake in a corporation to put pressure in various forms on the management board. Haigh et al (2004) identifies shareholder activism as a process by which shareholders of a listed firm, under the provisions of securities legislation, can demand members to meet and vote on specific resolutions. Therefore, shareholder activism is used as a tool to draw the attention of the firm’s managers and the board of directors (Schwab and Thomas, 1998).

of pursing corporate change (Icahn often threatened proxy fights) to unlock value for shareholders. The

4. Media begins to spread negative and false information about the company, management, or founders. Riders cause black PR, discrediting the management and shareholders, criticizing the inefficiency of management, providing in mass media compromising information about managers. Rumors about the imminent bankruptcy of the company are spread. These activities give incentives to a lot of negative assumptions in society, which basically facilitates the purchase of shares from the minority shareholders and might generate series of conflicts between shareholders and managers, creating a favorable environment for obscuring the actions of corporate raiders.

There are a multitude of mechanisms that should be put in place to better align managers with the interests of shareholders, and the government plays a big part of that puzzle. Agency problems arise when the management of a public company pursues its own economic self-interest ahead of shareowners’ and secondary stakeholder’s interests’ and portrays disregard for the respect for others and does not reflect at atmosphere of corporate citizenship. This behavior may manifest itself in the form of golden parachutes, long-term employment contracts, corporate jets, and other perquisites. Managers are susceptible to human nature and may pursue their own economic agendas without any concern for maximizing the wealth of the shareowners (Anson, White, McGrew, Butler, 2004). Nortel investors complained that even in its downward spiral, the executives received bonuses and issued excessively optimistic projections. Soon there would not be much left other than the lawsuits alleging issuance of misleading financial statements and blatant insider trading

In a democratic capitalist society being an activist investor is totally legal. The problem with those activists buying large position in companies is that they influence in the market, they buy up stock and force short time fixes that drive up the stock price so they manipulate stocks in they own interests.

Share holders will be more involved in the management of these companies. As Shareholders are the real “owners” of these companies, their interests would be to insure that management operates to the benefit of the company which they can accomplish by closely monitoring management. On the contrary, shareholders may be too profit and performance orientated. This may repel talented management as underperforming companies may leave executives with unfair compensation.

With these arguments and Oliver Curtis case, this report define concept of Insider trading and relevant terms. After that, it will analyse advantageous side and disadvantageous side of insider trading, and then what benefit could get from insider trading.

If companies publicize their corporate governance policies and the way they work, it can really boost their reputation and more and more stakeholders would like to work with

Because of their investments, my client is potentially exposed to anger from multiple groups opposed to companies in which my client has invested. For example, IICI holds investments in several large oil-companies. Angry environmentalists opposed to environmental damage, such as oil-spills and global warming, could target one of the oil companies in which IICI has holdings. Targeting investment companies with holdings in large oil companies could result in greater economic harm to the oil company than a direct attack on the oil company itself. For example, a large sum of money could be spent by an environmental group on a negative public relations campaign against an oil company itself, with perhaps little change in public opinion and little real financial harm to the oil company. However, a well-planned and coordinated computer attack on an investment company with oil holdings could harm the oil company itself. If an environmental group can prevent customers of an investment company from responding to changes in the financial market—buy, sell, or make changes in their accounts—then the attacker can affect the market performance of

Company can start some good awareness programs for their investors and educational activities to educate their investors. Company should make help the investors for hedging activities which are used in index future. Company can used various hedging activities for hedge fund. It creates awareness of