Finance

Methods in Shareholder Activism

An activist shareholder is a shareholder of a corporation who tries to use his or her equity share in a company to accomplish specific goals. The main objective of shareholder activism is to bring change within or for the company. At Reorg we have dedicated professional staff tasked with making financial decisions, providing crucial information, and safeguarding clients in an ever-changing business environment.

Activist shareholder aims to affect a company’s behavior by using their voting power or affecting other shareholders.

The goals of activist shareholders range from financial like increase of shareholder value, plans for cost-cutting or investment projects to non-financial like dis-investment from certain countries with bad human rights record, or to put pressure to adopt environmentally friendly policies.

Forms of Shareholder Activism

Activist shareholders can avail themselves of different methods to push desired changes within or for company. The most common forms of shareholder activism include:

  1. Shareholder resolution

The shareholders can propose the resolution motion for a vote at the company’s annual meeting. Even though the executives of companies generally stand up against the submission of shareholder resolutions, this activism method is somewhat effective at winning the public’s attention.

  1. Proxy fights

When a group of shareholders is not happy with the company’s supervision or its actions/decisions, it may convince other shareholders to use their proxy votes to bring about changes in the management. A proxy vote is a method of voting in which a shareholder is not willing or cannot attend the shareholders’ meeting and assign their voting power to a representative.

  1. Publicity campaigns

An activist shareholder may use electronic and paper media to draw the public’s interest in a crisis or issue in a corporation. At times, publicity campaigns can be employed to put pressure on the company’s management.

  1. Talks with management

Sometimes, activist shareholders can get their goals through simple talks with corporate management.

  1. Litigation

Activist shareholders can also initiate legal action against the company’s management to achieve their objectives. However, this recourse is the least desirable for both parties. The litigation processes are costly and can create negative opinions around the company.

Environmental groups have realized the potential of shareholder activism and work closely to influence the big corporation decisions in the areas of the environment.

Conclusion

As shareholder activism continues to be healthy, many believe the number of campaigns could be on the upswing. The chances of these campaigns to succeed are likely to grow higher. For big companies, heeding to and understanding shareholder concerns may be more critical than ever.

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