The Role of Shareholder Activism in Corporate Governance

Abstract

This paper explores the pivotal role of shareholder activism in shaping corporate governance practices, emphasizing its increasing significance in a landscape where ownership and management are often separated. The analysis delves into the historical evolution of shareholder activism, examining landmark cases that have influenced corporate policies since the early 20th century. Theoretical frameworks, including agency theory and stakeholder theory, provide a lens through which the dynamics between shareholder activists, boards of directors, and management can be understood. Various forms of activism, particularly the rise of activist hedge funds, illustrate the diverse strategies employed by shareholders to effect change. The impact of these activities on corporate governance is assessed, revealing both positive outcomes—such as enhanced transparency and accountability—and potential drawbacks, including short-termism in managerial decision-making. Ultimately, the insights gleaned from this study underscore the complex interplay between shareholder interests and corporate governance, highlighting the need for ongoing dialogue and adaptation in regulatory practices.

Keywords:

 Shareholder activism, corporate governance, agency theory, stakeholder theory, activist hedge funds, transparency, accountability, management decisions