The UCLA School of Law's Lowell Milken Institute is sponsoring a Private Fund Conference: The Role of Activist Funds. During one session I will be debating the merits of shareholder activism with Patrick Foulis of The Economist, who wrote that magazine's latest paean in favor of shareholder activism.
I'll only have ten minutes to present my basic case, so let me direct interested readers to my latest article on the topic, Preserving Director Primacy by Managing Shareholder Interventions (August 27, 2013), available at SSRN: http://ssrn.com/abstract=2298415, which argues that:
There are strong normative arguments for disempowering shareholders and, accordingly, for rolling back the gains shareholder activists have made. Whether that will prove possible in the long run or not, however, in the near term attention must be paid to the problem of managing shareholder interventions.
This problem arises because not all shareholder interventions are created equally. Some are legitimately designed to improve corporate efficiency and performance, especially by holding poorly performing boards of directors and top management teams to account. But others are motivated by an activist’s belief that he or she has better ideas about how to run the company than the incumbents, which may be true sometimes but often seems dubious. Worse yet, some interventions are intended to advance an activist’s agenda that is not shared by other investors.
Of course, as long time readers know, I have frequently criticized The Economist's coverage of shareholder activism, so here's a trip down memory lane:
Oct 9, 2014 ... The latest edition of The Economist is once again beating the drums for shareholder activism. (As I've said before, I love them despite their ...
Feb 8, 2015 ... The Economist is at it again, with yet another paean to shareholder activism. Or, more precisely,two: The latest print issue has both a leader and ...
Update: For an extended defense of my director primacy model of corporate governance, which I think anticipated Patrick's criticisms of it, see my book The New Corporate Governance in Theory and Practice. For an additional treatment of shareholder activism in the context of the broader set of corporate governance issues of the day, see my book Corporate Governance after the Financial Crisis.