For decades, shareholders were caricatured as passive owners: content to collect dividends, glance at annual reports, and cast their votes without fuss. Governance was the business of directors and executives; shareholders were expected to be seen, not heard.
That world has changed. The last forty years have seen shareholders—particularly the large institutional kind—step tentatively, then boldly, into the boardroom. What began with hostile raiders in the 1980s has evolved into a full-blown movement of shareholder activism. No longer the noisy minority, activists and institutional investors now shape strategy, discipline management, and even dictate environmental policy.
The British, with characteristic understatement, prefer the genteel language of “stewardship.” Americans, less shy, call it “activism.” But whatever the label, the effect is unmistakable: shareholders are no longer mere spectators; they are governors in their own right.
This essay, part of our series building on Good Corporate Governance – Foundations of Trust and Accountability, examines how shareholder activism has matured, the role of institutional investors as its unlikely enforcers, and what this means for the practice of corporate governance.
Raiders at the Gate: The First Act
The story begins in the 1980s, when a handful of swashbuckling investors turned the placid waters of corporate ownership into a storm. Carl Icahn, T. Boone Pickens, and Sir James Goldsmith became household names, if not exactly dinner-party guests. Their methods were simple, if brutal: buy a stake, threaten a takeover, and force the company to sell assets, spin off divisions, or pay out special dividends.
Boards, unused to such aggression, were caught flat-footed. The raiders framed themselves as liberators of shareholder value; critics saw only short-term pillaging. Either way, the lesson was clear: ownership conferred power, and power could be wielded.
Read this related post on this blog: Corporate Failures as Governance Lessons or read something on Carl Icahn in the Guardian – Carl Icahn charged with hiding billions in loans backed by company stock.
From Raiders to Reformers
By the 1990s, the tone had shifted. Hedge funds like Elliott Management and Pershing Square refined activism into an art. No longer content with asset-stripping, they launched proxy fights, filed lawsuits, and orchestrated carefully choreographed public campaigns.
These were no longer pirates but reformers—or at least they styled themselves as such. Their targets were often bloated conglomerates or sleepy management teams. The argument was not about greed but about governance: boards failing to hold executives to account, strategy drifting without purpose.
The battle for Target in 2009, where Bill Ackman’s Pershing Square spent millions in a failed attempt to reshape the retailer’s board, showed both the ambition and the limits of this activism. Success was not guaranteed; but even failure left a mark on how boards viewed their shareholders.
The Rise of the Sleeping Giants
For all their noise, activist hedge funds controlled only slivers of capital. The real muscle belonged to the institutional investors: pension funds, sovereign wealth funds, and the giant asset managers—BlackRock, Vanguard, State Street—who quietly accumulated ownership of the corporate world.
For years these giants were famously passive. Their portfolios were so vast, so diversified, that detailed engagement seemed impossible. Why bother with the governance of one company when you owned thousands? Economists described their stance as “rational apathy.”
But apathy became untenable. The financial crisis of 2008, rising public anger over executive pay, and the growing weight of ESG concerns forced institutions to take positions. CalPERS, the Californian pension fund, became an early reformer. Norway’s sovereign wealth fund developed voting guidelines that reverberated across Europe. And Larry Fink of BlackRock began his now-famous annual letters, reminding boards that capitalism without stewardship is simply speculation.
The giants had awoken.
Read more on BlackRock accused of contributing to climate and human rights abuses or Larry Fink’s 2025 Annual Chairman’s Letter to Investors.
Activism Reimagined: Climate, Culture, and Capital
If the raiders fought over break-ups and buybacks, today’s activists fight over climate change, diversity, and human rights. The watershed moment came in 2021, when a little-known hedge fund, Engine No. 1, took on ExxonMobil. With only a tiny shareholding, it managed—thanks to the support of institutional investors—to install three directors committed to pressing the oil major on climate strategy.
It was a David-and-Goliath story with a twist: David succeeded not by slinging stones, but by convincing Goliath’s brothers to switch sides. BlackRock, Vanguard, and State Street lent their votes, and Exxon’s board was changed forever.
This is activism reimagined: not hostile, but insistent; not about quick profit, but about long-term survival.
Read more in our blog in respect of European Sustainability Reporting Standards.
Governance Lessons from Case Studies
AT&T: Elliott’s Blueprint
In 2019, Elliott Management sent a blistering letter to AT&T, accusing it of strategic drift and poor capital allocation. The campaign led to asset sales and a renewed strategic focus. The board learned that even giants are not immune from shareholder scrutiny.
Carillion: The Silence of Investors
In the UK, the collapse of Carillion exposed the other side of the coin. Shareholders had been reassured, explanations accepted without question. When the edifice collapsed, Parliament’s inquiry concluded that investors had been as passive as the board was complacent. “Comply or explain” only works when someone listens—and challenges.
ExxonMobil: The ESG Turning Point
Engine No. 1’s triumph was not just about Exxon; it was about the future of activism. Shareholders proved they could use governance tools not merely for financial engineering, but for shaping corporate purpose.
The Double-Edged Sword of Activism
There is a temptation to see activism as a panacea. But it carries risks.
Activists can be impatient, forcing companies into short-term moves that undermine long-term health. They can destabilise management, create uncertainty for employees, and leave boards playing to the gallery rather than focusing on strategy.
Even ESG activism, laudable in intent, risks becoming performative. Companies may sign up to climate pledges with great fanfare, only to discover later that meeting them is a more demanding business than announcing them. Not all activism is noble; not all noble activism delivers.
The Power—and Peril—of Proxy Advisors
In this drama, proxy advisors like ISS and Glass Lewis play the role of chorus. Their voting recommendations, followed by thousands of institutional investors, can sway outcomes. To some, they are guardians of good governance; to others, unelected arbiters wielding disproportionate power.
Whatever one’s view, their influence illustrates the complexity of modern activism: a web of actors—hedge funds, institutions, advisors—each shaping outcomes, sometimes in harmony, sometimes at odds.
Redamore on SEC – Disclosure of Proxy Voting Policies and Proxy Voting Records by Registered Management Investment Companies.
Regional Variations: Activism with an Accent
Activism, like governance, reflects culture.
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In the United States, it is brash, litigious, and public.
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In the United Kingdom, it is more discreet, framed as stewardship, though no less consequential.
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In Europe, activism increasingly ties itself to sustainability agendas, echoing regulatory emphasis on ESG.
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In Asia, culture and ownership structures make activism more restrained, though Japan’s reforms are opening the door to greater shareholder voice.
The accents differ, but the chorus is global: shareholders are speaking louder.
The Future: From Activists to Stewards
The trajectory is clear. Shareholder activism is merging with institutional stewardship. The hedge fund raider and the passive giant are becoming unlikely allies. Together, they push boards not only on quarterly returns but on climate risk, diversity, and digital resilience.
Technology will accelerate this trend. Data-driven campaigns, AI-assisted voting, and global coordination mean no company can remain immune from scrutiny. The old world of passive ownership is gone; the new world of active stewardship is here.
Conclusion: The Governors We Did Not Elect
Shareholders were never meant to be governors. That role belonged to boards and executives. Yet governance, like nature, abhors a vacuum. Where boards fail, shareholders step in.
The question is not whether activism is good or bad, but whether it is effective—and whether it is anchored in the long-term interests of the company and its stakeholders.
As the Exxon case showed, even small voices can change the course of corporate history—if they are amplified by the giants of capital. Shareholder activism, once the domain of raiders, has become the practice of stewards.
Governance, in the end, is a shared responsibility. Boards must lead, but shareholders are no longer silent partners. They are, with stiff upper lip and growing conviction, co-authors of corporate destiny.
Read more on the UK Stewardship Code 2026,