(Written by Douglas Y. Park, Partner, Rimon, PC) – Shareholder activism has long carried a negative connotation among board members. The shareholder activist is too often seen as the gadfly shouting during the annual shareholders meeting, or the extremist group calling for divestment from certain countries.
This caricature is dangerously outdated. With multiple corporate scandals, the growing influence of proxy advisory firms and enhanced disclosure requirements from Sarbanes-Oxley, Dodd-Frank, and securities exchanges, shareholder activism has entered the mainstream. In 2010, 80% of companies surveyed by IRRC and ISS experienced at least one engagement from an activist investor. Activists include asset owners, such as Pershing Square Capital Management and Jana Partners, and asset managers, such as CalPERS, CalSTRS, and Vanguard, who push for corporate governance changes.