The Subversion of Shareholder Democracy and the Rise of Hedge-Fund Activism

Hedge fund activists are technically just minority shareholders, yet they exert enormous influence, often forcing companies to undertake fundamental restructuring and substantially increase stock buybacks and dividends. For instance, Third Point Management and Trian Fund Management, holding only 2 percent of the outstanding stock of Dow Chemical and DuPont, respectively, engineered a merger-and-split of America’s top two chemical giants at the end of 2015 that resulted in massive layoffs and the closure of DuPont’s central research lab, one of the first industrial science labs in the United States. How did hedge-fund activists gain such power?

In the 1980s, predatory value … Read more