Shareholder activism.

In plain English

Shareholder activism is pressure applied from inside the ownership structure, using the votes and proposal rights that come with owning shares to make a company change something its management would rather leave alone. The tools run from a private letter to management, to a shareholder proposal placed on the proxy ballot, to a public campaign nominating rival directors. Some activists focus on financial changes such as selling a division or returning cash. Others focus on governance or on social and environmental policy. The force behind it comes from votes, so an activist rarely needs a majority stake, only enough support from other shareholders.

01Why it matters

Activist campaigns can move a stock quickly and can change how a company is run for years, so if you own the shares through a fund, the fund's response is a decision being made with your money.

02The math, step by step

An investor buys 4 percent of a company and campaigns for two board seats. Winning requires convincing holders of another 45 percent or more to agree, which is why the campaign is fought in public.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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