Institutional activists can be divided into three groups: those who seek to implement sound corporate governance, those who target underperforming companies and those who advocate a social or political agenda. In practice, the first two groups tend to converge on companies that have substantially underperformed their peers or a market index. The last group focuses on companies whose businesses or corporate policies are viewed as detrimental to the social welfare in some fashion. Read the rest of this entry »
As illustrated by the above discussion, mutual fund advisers usually play an important, although often passive, role in corporate governance, evaluating management and stockholder proposals and voting in accordance with policies designed to further the interests of their funds. In recent years, however, mutual fund advisers have encountered an increasing number of proposals from stockholder activists, and in limited circumstances they have been among the activists pushing for such proposals. Read the rest of this entry »
As mentioned above, one group of activists has social rather than primarily financial agendas for U.S. companies. In the view of these activists, U.S. companies should help achieve social goals such as saving animals, protecting wilderness or alleviating poverty. Let’s consider whether these social goals are appropriate for most mutual funds and then for the subset of funds specifically geared to socially responsible investing.
Social activists who attempt to change corporate policies or challenge corporate practices take many different tacks in pursuit of their goals, but all are motivated by one fundamental principle: corporations shouldn’t be solely profit-maximizing entities; rather, they have an obligation to take into account their impact on social issues. Activists seek to influence companies through a variety of means—including litigation, picketing and public relations offensives—in an effort to encourage a company to alter its social policies in some fashion. Read the rest of this entry »
