Elsevier chair on activist shareholders

Dutch institutional investors and company executives are pressing for more rules to govern activist shareholders, news agency Reuters reports.

‘We have all seen that investors with a short term horizon and a strategy of shareholder activism try to make life miserable for companies,’ Jan Hommen, chairman of publishing group Reed Elsevier, was quoted as saying. ‘They have no loyalty at all to the company or other stakeholders.’, 9 May 2008

One reply on “Elsevier chair on activist shareholders”

Shareholder regulation is a really frightening prospect. As Joel Bakan told us in The Corporation, corporations exist solely to do their shareholders’ bidding. And, since you can’t actually canvass the shareholders to get their opinion on every decision, you need to assume that what they want is to maximise their profits.

However, the underlying principle that anybody with money can buy a limited-liability stake in the company opens up the possibility of shareholder activism. If companies can actually put limits on activist shareholders, the market ceases to be ‘free’.

It really aggravates me that there’s no way to discuss this without sounding like a caricature of a marxist, but it’s painfully obvious in this instance that (as with subsidised agriculture and import tariffs) the powerful let the market run free just exactly as far as it can run without threatening their stranglehold on the market and (by extension) the world’s resources.

Jan Hommen is being very sneaky with his moralising about ‘loyalty’. Shareholders owe absolutely no loyalty to the company-that’s the whole point of publicly-traded corporations. On the contrary company owes absolute loyalty to them, since the sole reason for its existence is to serve their interests.

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