What is a 'Shareholder Activist'

A shareholder activist is a person who attempts to use his or her rights as a shareholder of a publicly-traded corporation to bring about change within or for the corporation.

Some of the issues addressed by shareholder activists are for social change, requiring divestment from politically sensitive parts of the world — for example, greater support of workers' rights (sweatshops) and/or more accountability for environmental degradation. But the term can also refer to investors who believe that a company's management is doing a poor job. This class of activist investors often attempt to gain control of the company and replace management or force a major corporate change.

BREAKING DOWN 'Shareholder Activist'

Shareholder activism is a way that shareholders can influence a corporation's behavior by exercising their rights as partial owners. Classes of shares allow for distinct voting privileges, in addition to dividend entitlements. While minority shareholders don't run day to day operations, several ways exist for them to influence a company’s board of directors and executive management actions. These methods can range from dialogue with managers to formal proposals, which are voted on by all shareholders at a company's annual meeting.

Examples of Shareholder Activists

Carl Icahn is one of the financial industry’s most notable activist shareholders, along with his work as a businessman, traditional investor, and philanthropist. In the 1980s, Mr. Icahn developed a strong reputation as a “corporate raider.” This stemmed from his hostile takeover of TWA airline in 1985, among other milestones. Along with Texaco and American Airlines, TWA was one of the nation’s largest airlines at the time. Mr. Icahn successfully took over the company, steering it away from the brink of bankruptcy over a multi-year period.

Similarly, Bill Ackman considers himself an activist investor (although some would deem him primarily a contrarian investor). One of Ackman’s most high-profile positions was his short position and issuance of an enormous public relations campaign against the company Herbalife in 2012.

In contrast with Mr. Icahn and Mr. Ackman, many hedge funds have been recently pushing for change, related to their partners’ environmental, social and governance (ESG) concerns. Trian Partners, Blue Harbour, Red Mountain Capital, and ValueAct are among top funds, which have prioritized ESG in various forms. Some of these funds are being pushed by their own investors, who seek to own firms that demonstrate commitment to corporate social responsibility. Some predict 2018 could continue to see an increase in shareholder activism, specifically in Europe.

RELATED TERMS
  1. Control

    Control refers to having sufficient amount of voting shares of ...
  2. Common Shareholder

    The rights of common shareholders give them the ability to influence ...
  3. Hands-On Investor

    A hands-on investor is one who holds a large portion of a company's ...
  4. Shareholder

    A shareholder is any person, company, or institution that owns ...
  5. Proxy Fight

    A proxy fight occurs when a group of shareholders join forces ...
  6. Voting Right

    The right of a stockholder to vote on matters of corporate policy ...
Related Articles
  1. Investing

    Strategies Activist Shareholders Follow

    Activist shareholders, also called activist investors, are large-scale investors who use their investment power to influence public companies. While their goals can vary widely, the strategies ...
  2. Managing Wealth

    Carl Icahn's Investing Strategy

    Buying up failing investments and turning them around helped to create the "Icahn lift" phenomenon.
  3. Investing

    Nasty Shareholder Activist Battles And Why They Happened

    Shareholder activists can have a big impact on a company's operations. These battles turned ugly as management lost control.
  4. Insights

    Carl Icahn Biography

    Carl Icahn is a New-York-based investor and one of the 50 richest men in the world, with more than $20 billion in personal assets. He is known for his brash style as a corporate raider and as ...
  5. Investing

    Activist Hedge Funds Take New Approach to Changing Companies

    Research from Lazard indicates that activist investors are narrowing their lists of target companies, changing them from within.
  6. Investing

    How To Profit From The Rise in Proxy Fights

    A proxy vote is a vote cast by an entity or person on behalf of another. This sets the stage for a proxy fight between the current management and directors and the group trying to usher in change.
  7. Investing

    Does Carl Icahn Want to Buy Out Herbalife?

    Icahn has been in a contentious battle with investor Bill Ackman about Herbalife and has continued to up his stake--and suggesting it go private.
  8. Investing

    10 Top Targets of Activist Investors and Why They Want Change

    A list of stocks that exhibit potentially powerful characteristics for stock performance: attractive valuations with an activist trigger for outperformance.
  9. Investing

    Ackman and Icahn Battle Over Herbalife

    Tense words arise as Icahn ups his stake in the troubled multi-level marketing company.
RELATED FAQS
  1. What rights do all common shareholders have?

    Learn what rights all common shareholders have, and understand the remedies that can be taken if those rights are violated ... Read Answer >>
  2. How Do Proxy Fights Work?

    A proxy fight is when a group of shareholders are persuaded to join forces to win a corporate vote. Read Answer >>
  3. What happens to the shares of a company that has been the object of a hostile takeover?

    Learn about the effect on the share price of companies that are targets of hostile takeovers, which are tactics used by famed ... Read Answer >>
  4. What are the advantages of ordinary shares?

    Dividends and ownership rights are two advantages of investing in ordinary shares. Read Answer >>
Hot Definitions
  1. Inflation

    Inflation is the rate at which prices for goods and services is rising and the worth of currency is dropping.
  2. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  3. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  4. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  5. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  6. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
Trading Center