Over the last two decades, US corporate governance has witnessed a significant increase in the incidence and influence of shareholder activism. Shareholder activism, however, has been found to be inconsistent with US corporate governance which is framed within director primacy theory. In this theory, the board is able to carry out a unique combination of managerial and monitoring roles effectively, and shareholders are only capital providers to companies. Shareholder activism is normatively found inimical to effective and efficient decision-making, i.e. the board's authority, and to the long-term interests of public companies. The increasing willingness of institutional shareholders to participate into the decision-making processes of their portfolio companies is at odds with US corporate governance. Therefore, the aim of this thesis is to examine whether director primacy theory should be softened to accommodate greater shareholder activism in US corporate governance. This thesis presents an analysis of the legal rules that reflect director primacy theory. In this respect, US shareholders have traditionally had limited participatory power. The way in which the courts perceived the board's authority also stymied shareholder participation. This thesis considers not only legal and regulatory developments in the wake of the 2007-2008 financial crisis, but also the governance developments through by-law amendments which could potentially make an overall change in the balance of power between shareholders and the board. Shareholders are slowly moving to the centre of corporate governance in the US. History has shown that the board of directors often failed to prevent manager-induced corporate governance failures. This thesis argues that shareholder activism is necessary for improving the web of monitoring mechanisms and for a well-functioning director primacy model. Shareholder activism forces the board to more critical about management, which is a prerequisite for the director primacy model. Therefore, this thesis argues that shareholder activism should therefore be accommodated into US corporate governance. The proposed approach addresses accountability problems more effectively than the current director primacy model while recognising the board authority and enhances decision-making processes of public companies. In this regard, it makes several recommendations to soften the current director primacy model: establishing a level playing for private ordering, adopting the proxy access default regime, the majority voting rule, the universal proxy rules, and enhancing the disclosure requirements of shareholders. The present research also demonstrates that contemporary shareholder activism involves many complexities. It contains different types of shareholder activism, which differ by objectives, tools, and motives. It could be used for purely financial purposes or non-financial purposes or both. Furthermore, the concept of stewardship has been developed to address public interest concerns, namely short-termism in the market and pressures by activist funds through shareholder activism. In this way, this thesis develops a complete positive theory about shareholder activism rather than focussing on a specific type of activism. This complete analytical framework constitutes more reliable basis to draw normative conclusions rather than focussing on a particular type of activism.

<p>Bakgrund: De svenska börsbolagen gör större vinster än någonsin tidigare, men har fått stor kritik för att vara för långsamma i sin vinstallokering. Företag med överkapitaliserade balansräkningar utan investeringsbehov är potentiella måltavlor för riskkapitalisternas affärsidé om finansiell effektivisering och en aggressivare kapitalstruktur. Debatten i media har skapat kritik kring dessa så kallade kortsiktiga och giriga bolagsplundrare som påstås förstöra finansiella värden och kreditvärdigheten i företagen. I tidigare fall har marknaden svarat positivt på riskkapitalisternas investeringar, något som har reflekterats i ett kraftigt ökande aktiepris. Skeptiker hävdar dock att spekulationer är anledningen till att marknadsvärdet drivs upp, inte fundamentala aspekter.</p><p>Syfte: Syftet med denna magisteruppsats är att fastställa en bild av fenomenet riskkapital och hur dess aktiva ägande inverkar på svenska börsbolags kreditbetyg, kapitalstruktur och värdering.</p><p>Metod: För att uppnå syftet med vår magisteruppsats har en kvalitativ ansats till-lämpats baserad på tre börsbolag där riskkapitalisters aktiva ägande spelat en betydande roll. Det empiriska materialet har insamlats genom personliga intervjuer med aktie- och kreditanalytiker, och studien förlitar sig även på markandsdata, artiklar och nyhetssändningar i media, samt respektive bolags kvartals- och årsrapporter.</p><p>Slutsats: Studien har gjorts over den tidsperiod som varit riskkapitalisternas inve-steringshorisont – explicit och implicit. Genom att analysera det aktiva ägarskapet i tre svenska börsbolag kan slutsatsen dras att det inverkat positivt i form av högre prestanda och marknadsvärdering. De finansiella förändringarna har, till skillnad från kritiken, styrkt kreditbetyget i fallen Lindex och Volvo. En analys av Skandia/Old Mutual visade dock en marginellt ökad kreditrisk. Slutsatsen visar härmed att riskkapitalisternas inverkan på svenska börsbolag är värdeförädlande utan att äventyra den finansiella statusen.</p> / <p>Background: The Swedish blue chip companies are performing better than ever, but have been strongly criticised for being too slow in their excess fund allocation. Companies with overcapitalised balance sheets and no investment needs are potential targets for activist funds’ business idea of more aggressive capital structures and financial restructuring. In media, this debate has raised criticism against these so called short-sighted, greedy asset-strippers that destroy company values and increase the companies’ risk of default. In prior cases where activist funds have taken actions, the market has responded positively through increasing the share price. However, sceptics argue that the higher share price is merely a response to a speculative reaction with no fundamental argument supporting the upgrade in market capitalisation.</p><p>Purpose: The purpose of this thesis is to establish a view of the phenomenon of activist funds and their impact on blue chip companies’, listed on the Stockholm Stock Exchange, credit rating, capital structure and valuation.</p><p>Method: To fulfil the purpose of our master thesis, a qualitative approach has been applied based on three cases involving the activities of activist funds. The empirical findings have been retrieved via personal communications with stock- and credit analysts, and the study also relies on articles and news coverage from media, stock market data and annual reports from each of the chosen companies respectively.</p><p>Conclusion: The study has regarded the period of time which has been the investment horizon of the activist funds – explicitly and implicitly. Analysing their active ownership, the conclusion can be drawn that these activist funds have clearly had a positive impact on each of the blue chip companies’ performance and intrinsic value respectively. The financial restructuring has - contrarily to the criticism – strengthened the credit ratings in the cases of Lindex and Volvo. In the Skandia/Old Mutual-case, a marginally higher default risk was detected. Thus, the study has concluded that activist funds indeed add significant shareholder value without jeopardising the companies’ financial statuses.</p>

Bakgrund: De svenska börsbolagen gör större vinster än någonsin tidigare, men har fått stor kritik för att vara för långsamma i sin vinstallokering. Företag med överkapitaliserade balansräkningar utan investeringsbehov är potentiella måltavlor för riskkapitalisternas affärsidé om finansiell effektivisering och en aggressivare kapitalstruktur. Debatten i media har skapat kritik kring dessa så kallade kortsiktiga och giriga bolagsplundrare som påstås förstöra finansiella värden och kreditvärdigheten i företagen. I tidigare fall har marknaden svarat positivt på riskkapitalisternas investeringar, något som har reflekterats i ett kraftigt ökande aktiepris. Skeptiker hävdar dock att spekulationer är anledningen till att marknadsvärdet drivs upp, inte fundamentala aspekter. Syfte: Syftet med denna magisteruppsats är att fastställa en bild av fenomenet riskkapital och hur dess aktiva ägande inverkar på svenska börsbolags kreditbetyg, kapitalstruktur och värdering. Metod: För att uppnå syftet med vår magisteruppsats har en kvalitativ ansats till-lämpats baserad på tre börsbolag där riskkapitalisters aktiva ägande spelat en betydande roll. Det empiriska materialet har insamlats genom personliga intervjuer med aktie- och kreditanalytiker, och studien förlitar sig även på markandsdata, artiklar och nyhetssändningar i media, samt respektive bolags kvartals- och årsrapporter. Slutsats: Studien har gjorts over den tidsperiod som varit riskkapitalisternas inve-steringshorisont – explicit och implicit. Genom att analysera det aktiva ägarskapet i tre svenska börsbolag kan slutsatsen dras att det inverkat positivt i form av högre prestanda och marknadsvärdering. De finansiella förändringarna har, till skillnad från kritiken, styrkt kreditbetyget i fallen Lindex och Volvo. En analys av Skandia/Old Mutual visade dock en marginellt ökad kreditrisk. Slutsatsen visar härmed att riskkapitalisternas inverkan på svenska börsbolag är värdeförädlande utan att äventyra den finansiella statusen. / Background: The Swedish blue chip companies are performing better than ever, but have been strongly criticised for being too slow in their excess fund allocation. Companies with overcapitalised balance sheets and no investment needs are potential targets for activist funds’ business idea of more aggressive capital structures and financial restructuring. In media, this debate has raised criticism against these so called short-sighted, greedy asset-strippers that destroy company values and increase the companies’ risk of default. In prior cases where activist funds have taken actions, the market has responded positively through increasing the share price. However, sceptics argue that the higher share price is merely a response to a speculative reaction with no fundamental argument supporting the upgrade in market capitalisation. Purpose: The purpose of this thesis is to establish a view of the phenomenon of activist funds and their impact on blue chip companies’, listed on the Stockholm Stock Exchange, credit rating, capital structure and valuation. Method: To fulfil the purpose of our master thesis, a qualitative approach has been applied based on three cases involving the activities of activist funds. The empirical findings have been retrieved via personal communications with stock- and credit analysts, and the study also relies on articles and news coverage from media, stock market data and annual reports from each of the chosen companies respectively. Conclusion: The study has regarded the period of time which has been the investment horizon of the activist funds – explicitly and implicitly. Analysing their active ownership, the conclusion can be drawn that these activist funds have clearly had a positive impact on each of the blue chip companies’ performance and intrinsic value respectively. The financial restructuring has - contrarily to the criticism – strengthened the credit ratings in the cases of Lindex and Volvo. In the Skandia/Old Mutual-case, a marginally higher default risk was detected. Thus, the study has concluded that activist funds indeed add significant shareholder value without jeopardising the companies’ financial statuses.