For the better part of a century, there’s been a clear separation between the ownership and the management of publicly traded companies. Most shareholders haven’t individually owned enough stock or had the expertise to credibly demand a say in decision-making. As a result, most owners have been passive; if they disagree with the direction of a company, their only option has been to sell. But all that is changing. First, institutional shareholders have gotten bigger, and their ownership of corporate America has become more concentrated. These institutions invest the savings of many Americans, and the amount they manage has swelled. Second, many of these institutional shareholders have developed deep industry expertise, truly understanding the industries in which they invest. Third, poor performance by management and outright cases of abuse of power and even fraud have created a mindset among shareholders that management teams have lost their right to be left alone. Lastly, there are a few shareholders, commonly known as “activists” but whom I call “highly engaged shareowners,” who are galvanizing their fellow shareholders and providing the catalyst for management to be held accountable.
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