Shareholder Activism : A Multi-Dimensional View of a Conflict-Ridden Construct

We contend that shareholder activism is a conflict-rich construct given the heterogeneity of actors involved and the divergence of motives and interests of firm managers, shareholder investors, and proxy advisors. Proxy advisors, an exogenous actor that interacts with both shareholders and firms, suffer from rampant conflicts of interest negatively affecting investors and beneficiaries alike. Pointing at goal incompatibility as a tension generator, agency theory provides a context for understanding the inherent friction between key actors at the opposite ends of the table – shareholders and managers, or principals and agents respectively. When conflict abounds, recognizing forces that trigger escalation and de-escalation of conflict is vital. We refer to a framework proposed by Bartos & Wehr (2008) that portrays forces responsible for escalation, and de-escalation of conflict. We identify similar forces within the context of shareholder activism, and assert that key actors should be familiar with those igniters and diffusers of conflict