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Series:   Elements in Corporate Governance

The Rhetoric and Reality of Shareholder Democracy and Hedge-Fund Activism

Published online by Cambridge University Press:  05 December 2024

Jan-Sup Shin
Jan-Sup Shin
Affiliation:
National University of Singapore

Summary

This Element investigates the historical and systemic roots of hedge-fund activism. It argues that the spirit of the New Deal financial regulations was subverted in the 1980s and 1990s in the name of shareholder democracy and opened the door for the rise of hedge-fund activism. It analyzes the effects of regulatory reforms including the introduction of compulsory voting by institutional investors, proxy-voting rule changes that greatly facilitated aggregation of the proxy votes of institutional investors, and rules that allow hedge funds to draw effectively limitless alternative investments from institutional investors. This Element also evaluates the recent empirical research on hedge-fund activism and explains why shareholder activism has gone awry. It argues that the regulatory changes created a large vacuum in the arena of corporate voting that hedge-fund activists can effectively exploit for their own profits. It concludes with policy proposals for rebuilding the proxy-voting and engagement system.
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Keywords

shareholder democracyhedge-fund activismproxy rulesvalue creation and extractionproxy advisory firms
Type
Element
Information
Series: Elements in Corporate Governance
Online ISBN: 9781009576444
Publisher: Cambridge University Press
Print publication: 09 January 2025

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The Rhetoric and Reality of Shareholder Democracy and Hedge-Fund Activism
  • Jan-Sup Shin, National University of Singapore
  • Online ISBN: 9781009576444
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The Rhetoric and Reality of Shareholder Democracy and Hedge-Fund Activism
  • Jan-Sup Shin, National University of Singapore
  • Online ISBN: 9781009576444
Available formats
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The Rhetoric and Reality of Shareholder Democracy and Hedge-Fund Activism
  • Jan-Sup Shin, National University of Singapore
  • Online ISBN: 9781009576444
Available formats
×