Missing the Forest for the Trees: A New Approach to Shareholder Activism

Abstract

Shareholder activism has dominated corporate governance literature for the last decade. However, despite the abundance of research focusing on specific manifestations of activism, there is a dearth of literature tackling shareholder activism as a whole. This article puts forward a novel theory situating shareholder activism within a more complete framework, treating activism as a collection of diverse models that differ by motives, tools, and structures. This paper provides a more complete perspective on activism — an analytical understanding of activism as a model rather than an investigation of specific occurrences thereof — and a demonstration that different models of activism are present both in the U.S. and around the globe. In this way, the paper responds to calls from academia, practitioners, and the U.S. legislature for potential regulatory changes aimed at shareholder activism.

By surveying eleven different countries and the models of activism prevalent therein, and by widening the framework to account for the myriad forms of shareholder activism, this paper fills an important gap in current corporate governance literature. In particular, the paper’s main argument is that calls for regulatory changes are currently framed both too specifically and too generally By targeting specific actors like hedge funds without accounting for how such reform may affect other players, these regulatory proposals operate too narrowly. Still, others increasingly call for the adoption of specific arrangements from foreign jurisdictions without considering a full model of activism. This paper tackles these issues by providing a comparative examination of different models and proposing a procedural framework for any discussion of shareholder activism.

Keywords: Shareholder Activism, Corporate Governance, Hedge Funds, Proxy Access, Comparative Law

JEL Classification: K22, G34, G38