From this week's leader:
An analysis of around 2,000 interventions in America during 1994-2007 found not only that the share prices and operating performance of the firms involved improved over the five years after the intervention, but also that the improvement was greatest towards the end of the five-year period. The firms activists targeted tended to be underperforming relative to their industry.
Yes, there was such an analysis, but for one thing is was a study solely of interventions by hedge funds. It says nothing--nada, zip, zilch--about the merits of activism by, say, union pension funds.
Second, the analysis was done by folks with skin in the game--a deep ideological commitment to shareholder activism, so deep that they set up a Harvard law school clinic to promote it. I'm not saying they skewed their numbers. They are too good scholars to do that. I am just saying that all empirical studies need to be taken with a grain of salt and those by folks with an agenda need a larger than usual grain. (And, yes, I have skin in this game too.)
BTW, you'll want to compare Wachtell Lipton's critique of the analysis (available here and here) and Bebchuk's defense thereof (available here).
Back to The Economist:
Rather than making life harder for activists, America’s regulators should make it easier. They could adopt Britain’s practice of allowing activists to call a shareholder meeting at which individual board members can be voted out. “Poison pills” that are triggered when activists buy shares should be banned.
Stuff and nonsense. As I explained in Preserving Director Primacy by Managing Shareholder Interventions:
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.
I've said it before and, sadly, I must say it again: The Economist is ineducable on shareholder activism.
