Abstract
Abstract This chapter examines shareholder-driven corporate governance (SCG) through the twin concepts of shareholder democracy and shareholder activism. Taken together, these concepts are the vehicle through which SCG takes effect in practice. The term activist investor describes an institutional investor that seeks value-enhancing changes in the leadership, governance, capital structure, or strategy and operations of a corporation in which it is invested. There are two basic types of activism: offensive activism, in which a hedge fund takes over a poorly performing firm and then reforms it to enhance its performance; and defensive activism, in which the activist institution takes on an advocacy role when it is unhappy with a corporation of which it already holds a significant block. Meanwhile, shareholder democracy refers to the ability of shareholders to influence the corporation through their votes. It is an important concept in corporate law, one that underpins the legitimacy of shareholder activism.
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