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Offensive Shareholder Activism in U.S. Public Companies, 1900-49Brian R. CheffinsUniversity of Cambridge - Faculty of Law; European Corporate Governance Institute (ECGI) John ArmourUniversity of Oxford - Faculty of Law; University of Oxford - Said Business School; European Corporate Governance Institute (ECGI) February 11, 2011 University of Cambridge Faculty of Law Research Paper No. 09/2011 Abstract: “Offensive shareholder activism” involves buying up sizeable stakes in underperforming companies and agitating for changes predicted to increase shareholder returns. Though hedge funds are currently highly publicized practitioners of this corporate governance tactic, there has been no analysis of the extent to which managers of U.S. public companies were faced with challenges of this nature during the first half of the 20th century. This paper correspondingly examines instances during this period where investors engaged in offensive shareholder activism, based on a hand collected dataset of proxy contests occurring between 1900 and 1949. Our findings indicate that offensive shareholder activism, while not commonplace, did occur and was considerably more prevalent in the 1930s and 1940s than in earlier decades. We explain our results by reference to a simple model of offensive shareholder activism and argue that the ebb and flow of takeover activity may have been the primary determinant of the trends we observe.
Number of Pages in PDF File: 36 Keywords: Shareholder Activism, Takeovers, Proxy Regulation JEL Classification: K22, N21, N22 working papers seriesDate posted: February 12, 2011 ; Last revised: February 21, 2011Suggested CitationContact Information
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