Question 1

"Wall Street walk" is a common expression for individual shareholders whose only activity is selling shares they are unhappy with.

Accepted Answer

"Wall Street walk" refers to the action of selling shares by individual shareholders who are dissatisfied with their investments.

Question 2

Around the world, the two most common types of large shareholders that actively participate in management are

Accepted Answer

Family-Owners and State-Owners are the two most common types of large shareholders that actively participate in the management of companies around the world. Family ownership is prevalent in many businesses globally, especially in Asia and Europe, where families often retain control over large corporations. State ownership is significant in various countries where the government holds substantial stakes in key industries for strategic, economic, or social reasons.

Question 3

Individual shareholders, large shareholders, and institutional shareholders are mutually exclusive categories of shareholders.

Accepted Answer

Shareholders can belong to multiple categories simultaneously, for example, an individual shareholder can also be a large shareholder or an institutional shareholder.

Question 4

Proxy fights to change directors are an easy and cheap way for shareholders to change directors at their firm.

Accepted Answer

Proxy fights are often expensive and complex processes, as they involve soliciting and gathering votes from shareholders to win control over the company's board of directors. This can require significant resources, including legal and advisory services.

Question 5

Which type of institutional investor is the most active in monitoring the firm?

Accepted Answer

Pension funds have a fiduciary duty to monitor the companies in which they invest, as they are managing the retirement funds of their participants. They are actively involved in monitoring the firm's performance and making recommendations to management if they perceive issues. Mutual funds, insurance companies, and bank trusts also monitor companies, but pension funds are typically considered the most active in this regard. Venture capitalists are not institutional investors but rather provide funding to startups and emerging companies.

Question 6

Public firms in the U.S.and the U.K.have the most dispersed ownership structures in the world.

Accepted Answer

According to a study by The Economist, public firms in the U.S. and the U.K. have the most dispersed ownership structures compared to other countries.

Question 7

Shareholder activism is always a good way to predict good firm performance.

Accepted Answer

Shareholder activism can have both positive and negative effects on firm performance. While it can signal that shareholders are engaged and interested in improving the company, it can also lead to short-term changes that may not be sustainable in the long run. Therefore, it is not always a reliable predictor of good firm performance.

Question 8

An institutional shareholder is usually a large percentage shareholder of a firm.

Accepted Answer

An institutional shareholder is typically a large financial organization that invests and trades in the stock market on behalf of their clients. They often hold a significant percentage of a company's shares.

Question 9

Today, anyone owning more than $5,000 or 1% of a firms stock on a continuous basis for at least 2 years is able to submit a proposal to be considered and voted on at a shareholders' meeting.

Accepted Answer

The current rule by the SEC allows shareholders owning at least $2,000 or 1% of a company's stock for at least one year to submit proposals for consideration at a shareholders' meeting.

Question 10

Which is/are a) roadblocks) regarding effective shareholder activism?

Accepted Answer

All of the above statements are potential roadblocks to effective shareholder activism. Short-term views of investors can lead to a lack of patience or persistence with engagement efforts. Conflict of interests by private fund advisors can hinder their ability or willingness to support activist efforts. Additional regulatory and tax burdens imposed on mutual funds that own more than 10% of any one company can discourage them from engaging in activism.

Question 11

In a "derivative" lawsuit, the shareholders file a claim on behalf of the company and any recovery from managers or directors is paid to the company not to the shareholders

Accepted Answer

This is the definition of a derivative lawsuit. The shareholders file a claim on behalf of the company and any recovery is paid to the company, not the shareholders themselves.

Question 12

Pension funds tried to influence the firm by targeting the poor corporate performers and pushing them to reform.

Accepted Answer

Pension funds have been known to use their investment power to push for corporate reform, including pressuring poorly performing companies to improve.

Question 13

Most shareholder proposals submitted by individual investors do not pass, especially those that go against management desires.

Accepted Answer

According to SEC data, the majority of shareholder proposals submitted by individual investors do not pass, and those that go against management desires are often even less likely to pass.

Question 14

If managers waste company assets for personal use, shareholders are.not permitted to use the legal system to sue the managers.

Accepted Answer

Shareholders have the legal right to sue managers who waste company assets for personal use. This is known as a breach of fiduciary duty. Shareholders can hold managers accountable through legal action if they believe the managers are not acting in the best interest of the company and its shareholders.

Question 15

Which of the following makes shareholder activism effective?

Accepted Answer

The answer of Which of the following makes shareholder activism...

Quiz 7: Shareholders and Shareholder Activism