Shareholder activism plays a pivotal role in the evolution of corporate America’s public companies. In fact, the listed companies that shareholders targeted in 2013 “had an average market capitalization of $10 billion.” That’s some serious power when it comes to influencing major corporations in the United States.
But what does shareholder activism really mean? To put it simply, shareholder activism occurs when an individual (or an entity) uses their equity stake in a corporation to put pressure on the company to make specific changes. The modifications these “activists” seek can vary in degree and in the hostility of their delivery.
On the relatively lighter end of requests, activists might urge companies to adopt environmentally friendly policy changes. On the moderate side of financial reform, they might seek compensation reviews or a cost-cutting analysis. And on the most extreme side of shareholder influence, activists could seek a complete board of directors overhaul—a proverbial “wiping of the slate” at the highest level of corporate leadership. In addition, shareholder activism can come in various forms: litigation, proxy battles, publicity movements, shareholder resolutions, simple negotiations with management or board members, and more. For an in depth analysis on the types of shareholder activism, check out this report from PwC.