Shareholder activism is the way in which shareholders can assert their power as owners of the company to influence its behaviour. Activism covers a broad spectrum of activities. Activism includes “voting with ones feet” (exit), private discussion or public communication with corporate boards and management, press campaigns, blogging and other e-ways of public “naming and shaming”, openly talking to other shareholders, putting forward shareholder resolutions, calling shareholder meetings and – ultimately - seeking to replace individual directors or the entire board.
In some cases shareholder activism is directed against other large shareholders, not against directors. Shareholder activism can be collaborative, in particular when it is conducted in private.
Shareholder activism is controversial. Proponents argue that companies with active and engaged shareholders are more likely to be successful in the long term than those that are left to do what they choose. Vigilant shareholders are said to play the role of fire alarms and their mere presence can alleviate managerial or boardroom complacency. When companies perform poorly, shareholders activists are said to play the role of fire brigades that bring about change and more quickly than would have been the case had the fire brigade been on strike.
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