Activist investors are needed more than ever

Little scares the C-suite like shareholder activism. Bosses stay awake worrying about a call, a letter or a 100-page presentation in which a hedge fund outlines the depths of their ineptitude. At the start of the year executives were especially on edge. During this year’s annual “proxy season”—a succession of shareholder meetings—they have mostly avoided votes on dissident nominees to their boards. Nevertheless in recent months some of the world’s largest firms—including Alphabet, Bayer, Disney and Salesforce—have had to tussle with activists, who are increasingly focused on the biggest companies. On May 25th, as we published this article, the battle between Carl Icahn, a prominent activist, and Illumina, a genomics giant, was set to come to a head.

Activist hedge funds are often seen as villains who are nasty, brutish and focused on the short term. Sometimes the shoe fits. But more often activists are playing a role that is essential for shareholder capitalism. For several reasons, their campaigns are increasingly important.