“Shareholder activism can raise the stock price of a particular company, to benefit particular shareholders, in the short run. But it lowers the value of the stock market as a whole, for average investors, in the long run.
This is because the shareholder activists use their ownership position to pressure boards of directors into strategies they claim ‘unlock shareholder value,’ and then dump their stock as soon as the stock price rises.”
Often they leave behind a company that is over-leveraged, depleted of cash, and unable to invest for future, longer term growth. The result is stagnation or worse, loss of jobs, and at times ultimate failure of the enterprise.
(Quoted excerpts from the Wall Street Journal)
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