Shareholder activism is the way in which
shareholders can assert their power as owners of the company to influence its
behaviour. Activism covers a broad spectrum of activities. Activism includes
“voting with ones feet” (exit), private discussion or public communication with
corporate boards and management, press campaigns, blogging and other e-ways of
public “naming and shaming”, openly talking to other shareholders, putting
forward shareholder resolutions, calling shareholder meetings and – ultimately
- seeking to replace individual directors or the entire board.
In some cases shareholder activism is directed against
other large shareholders, not against directors. Shareholder activism can be
collaborative, in particular when it is conducted in private.
Shareholder activism is controversial. Proponents argue
that companies with active and engaged shareholders are more likely to be
successful in the long term than those that are left to do what they choose.
Vigilant shareholders are said to play the role of fire alarms and their mere
presence can alleviate managerial or boardroom complacency. When companies
perform poorly, shareholders activists are said to play the role of fire
brigades that bring about change and more quickly than would have been the case
had the fire brigade been on strike.
Opponents say that "shareholder activism" is a euphemism for
disruptive, uninformed, populist ranting or "take the money and run".
In its extreme forms activism is said to be an extortion scheme that weakens
strong companies. More fundamentally, there is disagreement about how much
power shareholders should delegate to corporate boards and when direct
shareholder action becomes necessary and on what terms. In some countries,
organized labour is accused of using shareholder activism tactics as a
capitalist tool in the class struggle.
When stakeholder protection is
left to the voluntary initiative of managers, relations with social activists
may become an effective entrenchment strategy for inefficient CEOs. We thus
argue that managerial turnover and firm value are increased when explicit
stakeholder protection is introduced so as to deprive incumbent CEOs of
This finding provides a rationale
for the emergence of specialized methodologies that help firms commit to
stakeholder protection even in case of managerial replacement.
resilience of the organizational strategy, people and operations will result in
a requisite organization and hence aligning the shareholder and management’s
agenda. The BIOSS methodology is therefore an excellent tool based on over 40 years of academic research.