investedinthefirm,maynotbegoodfortheotherinvestors
in the firm.
WhatMayCausetheLikelihoodofManagementChangingto
Shift?
Ifthere isoneconstant inmarkets, itischange.Managers
whowereviewedasimpervioustooutsidechallengecanfind
theirauthorityquestioned.Whataresomeofthefactorsthat
may cause this shift?
- The first is that the rules governing corporate
governancedochangeovertime,sometimesinfavor
of incumbentmanagers and sometimes in favor of
stockholders. In recent years, for instance, many
emergingmarketeconomieshavemadeiteasierfor
stockholdersincompaniestochallengemanagers.A
similartrendcanbeseeninEurope,whereincumbent
managersclearlyhadtheupperhanduntilafewyears
ago. The impetus for this reform has come from
institutionalinvestorswhohavegrowntiredofbeing
ignored by managers when confronted with clear
evidence of poor decisions. - Even when the rules allow investors to challenge
management decisions, most investors take the
passiverouteofvotingwiththeirfeet.Itisherethat
thepresenceofactivistinvestorswhoarewillingto
take large positions in companies and use these
holdings as a platform to challenge and change
management practices makes a difference. In the
UnitedStates,theseinvestorsmadetheirpresencefelt
in the 1980s.