The front cover of the 6th February issue of The Economist shows the Walk Street Bull being attacked by a pack of hyenas.
The picture shows vividly to the readers the headaches now facing by the American Inc. In two articles, the Economist provides readers with in-depth analysis and clear explanation of the work of a batch of hedge funds which, by making full use of their shareholder rights, have caused much irritations to the CEOs of US public companies and changes in corporate directions (e.g., the recent merger of Staples and Office Depot, the two biggest retailers of office equipment in the States).
The articles analyse with empirical studies the habitat that facilitate the insurgence of such phenomenon.
While the activist investors may not be welcomed by the senior management, the Economist is rather positive on their work in that the public companies are made more efficient and the once passive investors like mutual funds are nudged to be more concerned with running of the public companies.
The articles also pointed out that owing to different culture and legal framework, the activist investors are more gentle in Europe and they are not that successful in Asia.
For readers in Hong Kong, they may still remember the work of the "Good Child" fund that made the Link REIT becoming more aggressive in evicting old tenants, and/or prompted one tycoon strengthened his grip of his companies.
The Hong Kong readers who are stock investors would also be familiar with the name of Mr. David Webb, a vocal investor/commentator.
Mr. Webb is, oftentimes, the lone voice in the market pinpointing deficiencies in corporate governance of companies listed in Hong Kong.
To certain extent, I am inclined to agree with the viewpoint of the Economist that the activist investors are good for the public companies.
For those interested in the topic of corporate governance or the "modus operandi" of the activist investors, do read this week's Economist.