David Prosser addresses the titular question:
Companies targeted by activists often seek to portray their pursuers as "corporate raiders", accusing such investors of being motivated by the desire to turn a quick profit, rather than any interest in the long-term value of the company.
For their part, activists argue they are holding to account companies whose managements have become complacent. Moreover, while corporate raiders of the 1980s may have been unpopular, they were only able to achieve their objectives with the support of shareholders upset that their stakes in underperforming conglomerates did not reflect the value of these companies' constituent parts. ...
... the evidence that shareholders feel the benefit of investor activism is patchy. Many academics argue that a company's financial performance - its operational results and share price returns - rarely gets much of a boost from an attack by activist investors.
My take on the issue is that activists generally are not good for other investors, but that some shareholder interventions can be beneficial. The trick, I recently argued, is sorting out the good from the bad and figuring out ways to deter the bad interventions:
Even though the primacy of the board of director primacy is deeply embedded in state corporate law, shareholder activism nevertheless has become an increasingly important feature of corporate governance in the United States. The financial crisis of 2008 and the ascendancy of the Democratic Party in Washington created an environment in which activists were able to considerably advance their agenda via the political process. At the same time, changes in managerial compensation, shareholder concentration, and board composition, outlook, and ideology, have also empowered activist shareholders.
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.
This chapter proposes managing shareholder interventions through changes to the federal proxy rules designed to make it more difficult for activists to effect operational changes, while encouraging shareholder efforts to hold directors and managers accountable.
Bainbridge, Stephen M., Preserving Director Primacy by Managing Shareholder Interventions (August 27, 2013). Research Handbook on Shareholder Power and Activism, Forthcoming; UCLA School of Law, Law-Econ. Research Paper No. 13-09. Available at SSRN: http://ssrn.com/abstract=2298415
