Activist investor

Activist investor. An activist investor attempts to force a corporation to make changes in management, board structure, investment policies, use of retained earnings, or other practices, often by introducing shareholder proposals or putting forward alternative directors.

Activist investors may be hedge funds, institutional investors, such as money managers or pension funds, wealthy individual investors, or groups of investors with a common cause.

Some activists deliberately accumulate substantial stakes in undervalued companies to force changes that will increase the share price so they can sell at a profit. Others, such as long-time or majority stakeholders, may object to current management practices, prefer an independent board of directors, or want a voice in executive pay. While they seek improvement to the bottom line, they may also be committed to strengthening the company in other ways.

Activist methods vary as well. Some wage public relations and proxy wars while others seek to implement their proposals through negotiation. In recent years activists have achieved a number of goals including increased respect for their power to effect change.