Topic 3 - Shareholder Activism

Question 1

shareholder activism

Answer 1

• Using a minority equity stake in a publicly-traded company to influence its actions
• shareholder activists (and sometimes other, non-shareholder activists) seek to impose costs on target companies greater than the perceived cost of agreeing to demands

Question 2

nonfinancial shareholder activism

Answer 2

Using minority equity stakes in publicly- traded companies to bring about social change

Question 3

is shareholder activism compatible with fiduciary duty?

Answer 3

sometimes. ..
- AFL-CIO’s approach to activism w/Larker and Tayan claiming they were just trying to support their own union-organizing efforts and punish co’s they didn’t like [fund activism might be value-destroying]
- AFL-CIO’s response: saying they have a valid rationale for activism that goes beyond their particular interests

Question 4

Larker and Tayan critique

Answer 4

• ERISA requires fund trustees to promote economic interests of plan beneficiaries only
• In 2011, Dept. of Labor Inspector General found pension fund proxy voting (by all pension funds) often unrelated to economic benefits for plan beneficiaries
• “U.S. Department of Labor is clear that using a pension’s ownership position in a firm for advocacy purposes is a violation of ERISA”