Activist directors: the evolution of hedge fund activism in the S&P 500

Journal article

The prevailing rhetoric associated with hedge fund activism is almost universally negative. This Article provides new evidence of activist hedge fund behavior that contradicts this dominant narrative. The principal argument of the Article is that the conventional picture of hedge fund activism requires updating to account for the phenomenon of activist board representation.
This Article makes two general contributions to academic and policy debates on hedge fund activism. First, it analyzes original, hand-collected data on all activist hedge fund campaigns at S&P 500 companies from 2010 to 2019. Currently, there is continued reliance on empirical studies of hedge fund activism that originate from the mid-2000s. However, hedge fund activism has evolved considerably over the past twenty years since these studies were published. Activist hedge funds now increasingly target America’s largest companies—the S&P 500. An analysis of such campaigns has never before been seen in the literature. The study therefore contributes up-to-date insights on the activist campaigns most likely to have an outsized impact on companies, the economy, stakeholders, and society. Second, it demonstrates that a relatively new form of activism—activist board representation—manifests very differently to traditional perceptions of hedge fund activism. Now the most common campaign strategy, the appointment of activist directors can have a positive impact on target companies. In particular, activists seeking board seats often propose changes to corporate strategy and operations. This signifies a longer-term approach to substantive value creation, rather than the short-term financial engineering that activist hedge funds are commonly criticized for engaging in. The striking differences observed in campaigns where activist directors are sought, versus those campaigns where they are not, prompts some necessary reflection of the pervasive critiques of hedge fund activism.

Authors: Christie, A

• Publication status: Published
• Peer review status: Peer reviewed
• Publisher: University of Connecticut
• Journal: Connecticut Law Review
• Volume: 57
• Issue: 2
• Pages: 523-620
• Publication date: 2025-02-05
• Acceptance date: 2024-05-10
• EISSN: 0010-6151
• ISSN: 1930-9813
• Language: English