Studying Corporate Governance
Activist investors—long criticized as corporate raiders who enrich themselves at the expense of employees, customers and communities—may actually benefit publicly held companies by forcing boards to pressure management for change, says Management Professor Ram Subramanian of the School of Business.
Subramanian studied venerable bookstore chain Barnes & Noble and Internet company Yahoo Inc. At Barnes & Noble, the CEO settled a shareholder lawsuit that was filed after an activist investor raised concerns over the company’s purchase of a college bookstore chain from that CEO. At Yahoo Inc., an activist investor pushed Yahoo Inc. to fire its chief executive after the company confirmed that the exec had lied on his resume.
“Activist investors are people who buy millions of shares in a corporation, which gives them power to influence management,” says Subramanian, who used both companies as case studies in his research. Through the case studies, Subramanian analyzes the motivations of activist investors.
“My research tries to understand whether their actions are beneficial or hurtful,’’ he said, adding that he uses the case studies in his MBA classes, where students debate ethical and governance issues. “I select cases for my research based on the presence of tension. There is no single perspective, so people can look at the same issue from multiple points of view.”