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Delaware chief justice cautions against shareholder activism

By Melissa Lesh

25 March 2014 at 13:14 BST

Activist hedge funds as they stand aren't helping the economy or the company, said Judge Leo Strike in a recent issue of the Columbia Law Review.

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The growing trend of activist shareholders could be detrimental if boundaries aren’t put in place, said Judge Strike.  If a hedge fund is an activist shareholder, it can dispute share value and has an explicit say in the running of companies.  He recommended that say-on-pay votes be limited to every few years, and that shareholders should be charged for submitting other proposals.  If these reforms do not take place, Judge Strike predicted investors could “turn the corporate governance process into a constant ‘Model United Nations’ where managers are distracted by referendums on a variety of topics proposed by investors with trifling stakes.”  The state of Delaware is the base of almost half of all US public companies. Source: Financial Times


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