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99 B.U. L. Rev. 971 (2019)
The Future of Shareholder Activism

handle is hein.journals/bulr99 and id is 989 raw text is: 







THE FUTURE OF SHAREHOLDER ACTIISM


                  ASSAF HAMDANI* & SHARON HANNES**



                                 ABSTRACT
      Activist hedge funds do not hold a sufficiently large number of shares to
win proxy battles, and their success in driving corporate change relies on the
willingness of institutional investors to support their cause. Against this
background, this Article advances three claims about the interaction of activist
hedge funds and institutional investors' stewardship. First, this Article argues
that the rise of activist hedge funds and their dramatic impact cannot be
reconciled with the claim that institutional investors have systemic conflicts of
interest that lead them to favor management. One cannot celebrate the
achievements of activist hedge funds and at the same time argue that
institutional investors systemically desire to appease managers. Second, this
Article explains that the rise of money managers 'power is changing the nature
of shareholder activism. Large money managers' size and influence mean that
they need not resort to aggressive tactics to influence companies' management.
In today's marketplace, management initiates contact with large institutional
investors to learn about any concerns that could trigger activist attacks. Finally,
this Article argues that even well-incentivized institutional investors are unlikely
to pursue some activist interventions-specifically, those that require the
appointment of activist directors to implement complex business changes. This
Article analyzes the role activist directors play and show that it might require
changes too dramatic to money managers' business model and regulatory
landscape. Institutional investors are therefore unlikely to displace activist
hedge funds.








    Professor of Law, Tel Aviv University.
     Dean and Professor of Law, Tel Aviv University, Faculty of Law.
  For their helpful comments, we wish to thank Michal Barzuza, Kobi Kastiel, and Ed Rock.
This Article was prepared for Boston University Law Review's Symposium on Institutional
Investor Activism in the 21st Century: Responses to A Changing Landscape. We thank the
symposium participants for their insightful comments, and Shoval Barazani, Nimrod Halivni,
and AssafMatza for their extremely able research assistance. Financial support was provided
by the Center for Empirical Studies of Decision Making and the Law.

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