This year is likely to be another busy year for shareholders. More IPOs are scheduled, and more startups are taking off and reaching that fabled “unicorn” status. As businesses and innovations change to reflect a digital, on-demand industry, investors begin demanding more from the companies whose shares they hold: faster improvements, better numbers, heightened revenue. But while shareholder activism can be a good way to open conversations between businesses and their supporters, it can also create undue stress. Some business leaders think shareholder activism has gone overboard; others think this is just the beginning.
Ken Jacobs, Lazard CEO, doesn’t think shareholder activism is going anywhere. Jacobs doesn’t believe that activist shareholders are a simple problem that needs to be fixed; rather, he argues that shareholder activism is just part of what business in the modern world looks like. “What’s really changed is that shareholders are much more engaged in affecting a company’s performance,” he explains. “And as a result of that it’s a kind of environment that is going to be here for a long time.”
Others, however, believe that something must be done about shareholder activism. Investors now just demand more from companies. “In a culture that favors quick wins over long-term investment, activists who present a forceful way to increase immediate shareholder value often have a receptive audience,” says Fortune. Historically, shareholders’ rights and influence were kept at a minimum, but now shareholders’ voices have the power to bend major corporations.
In the past, shares were usually kept for about three years; now, shares are generally sold in the first six months. And while shareholders can offer useful advice, many of them are now focused on a company’s short-term life and what they can expect immediately. Patience and the foresight for the future have vanished from many shareholders’ priorities.
Despite their often negative influence on companies, however, it seems that the trend of influential shareholder activism is likely to stay. In a survey of 24 activist firms engaged in 1,200 different events, 58% of participants saw significant future opportunities for shareholder activism. For better or worse, shareholders will continue to have a loud say in a company’s decisions—the key is how we learn to work with that new reality.
