Shareholder Activism Flashcards
What is shareholder activism?
Using equity stakes to influence company decisions for financial or non-financial changes.
What are the goals of shareholder activism?
Governance reform, financial restructuring, cost-cutting and ESG improvements.
What is the activism spectrum?
Ranges from passive actions (letters, meetings) to assertive tactics (proxy battles, campaigns).
What defined shareholder activism in the 1980s?
Proxy battles and breaking up companies (corporate raiders)
How did activism change in the 1990s?
Focused on minority board representation and financial restructuring.
What tactics do modern activists use?
Negotiations, proxy battles, media campaigns, capital allocation changes.
What is hedge fund activism?
Aggressive campaigns for board changes, divestitures, or strategy overhauls.
What is a “vote no” campaign?
Urging shareholders to withhold votes from certain board nominees.
How do social groups engage in activism?
They focus on ESG issues like climate change and lobbying.
What are shareholder proposals?
Formal requests for corporate action on governance or policy issues.
What are SEC Rule 14a-8 submission rules?
Own $2,000 in stock for one year, limit to 500 words and submit 120 days early.
Why might proposals be excluded?
If they concern ordinary business, false statements or have been already implemented.
What changed in 2020 for proposals?
The SEC raised the minimum submission threshold to $25,000 to avoid frivolous proposals.
What financial factors trigger activism?
Low market-to-book ratio, high cash reserves, or poor performance.
What governance issues trigger activism?
Stale boards, poor governance practices, or past activist success.
