abletopresentproposalsto stockholderstochangepolicies
that they feel are inimical to shareholder interests. Often,
these proposals are centered on corporate governance;
changing the way the board of directors is chosen and
removing antitakeover clauses in the corporate charter are
commonexamples.Activistinvestingisarecentphenomenon
and itis stillrare;between 1986 and theearly1990s,five
institutional investors—California Public Employee
Retirement System (Calpers), College Retirement Equities
Fund(CREF), CaliforniaState TeacherRetirement System
(Cal-STERS),NewYorkCityEmployeesRetirementSystem
(NYCERS), and State of Wisconsin Investment Board
(SWIB)—accountedforalmost 20 percentofallstockholder
proposals.
8 It should be noted, though, that the record of activist
investors in changing management policies and improving
operating performanceismixed. Although thesuccess rate
has improved over recent years, less than a fifth of all
shareholderproposalsoncorporategovernancegetmajority
support, and evenwhen passed,boards oftenignore them.
Whilethere isevidencethat activistinvestors targetpoorly
managed firms with low insider holdings, there is little
evidencethattheysucceedinimprovingperformanceatthese
firms.
Proxy Contests
At largepublicly tradedfirms with widelydispersed stock
ownership,annualmeetingsarelightlyattended.Forthemost
part,stockholdersinthesecompaniestendtostayawayfrom
meetings,andincumbentmanagersusuallygettheirvotesby
default,thusensuringmanagement-approvedboards.Insome
companies, activist investors compete with incumbent