This may be so, however, as shareholders have been kept out of the process of controlling their companies, in the face of imperial management, it is understandable that, in some cases, some activist shareholders may be overzealous.
Onésimo Alvarez-Moro
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Last year was a banner year for US corporate buyouts and many experts predict 2007 will be even bigger. A number of factors have been cited to explain this private equity trend, from too much cash sloshing around the markets to the need to get certain deals done quickly before a newly Democratic Congress puts the kibosh on them.
There is another possible explanation for the shift to private equity, however: public shareholders may have made themselves so bothersome that many corporate managers simply do not want to deal with them. Although the media often portray shareholders as helpless victims of managerial greed, this portrait is misleading. For most of the twentieth century, investors who owned stock in public companies were indeed disorganised, diffused, passive and powerless. Today shareholders are in a very different position. Legal and market changes have ensured that public shareholders now enjoy more leverage over directors and executives than at any time in US business history.
The growth of mutual fund investing, for example, allows thousands of small individual investors to amass large positions in a company’s stock. Class action lawsuits, which allow single shareholders to sue on behalf of all public shareholders, are on the rise.
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