5/20/2009

I see that Deutsche Bank is being pushed by an activist shareholder group to spin off its investment banking side and keep its distance from the US. They plan to bring it up at the next annual shareholder meeting and Deutsche Bank has already said they'll be recommending rejection of it. What do you think about activist shareholders?

My view is they can do companies more harm than good by pointing out where they perceive the company's business strategies or core business is flawed. Activist shareholder groups may well have valuable input and are often comprised of very smart people who know more about the company than a lot of the staff do. The influence of activist shareholder groups on the average investor certainly shouldn't be underestimated.

However, their very actions are enough to cast doubts in the minds of other shareholders as to the competency of the board, that had otherwise been quite happy to plod along. As a result, they can be tempted to take their money and run, investing it elsewhere. Others see people leaving and make the move too in case someone knows something they don't.

I would never say you should be denied a voice in a company you plowed your hard earned cash into and you of course have every right to expect a decent return on that investment. Sometimes I think though their actions have an adverse effect rather than the positive one the group was hoping for when it initially formed.

Has anyone had any experience of these groups or been a part of one? Maybe my outlook on them is too negative but to be honest if it were me, I'd probably be one of the investors that would run when I heard rumblings of one forming.

Deutche Bank story from the Financial Times