The Activist Investor Dilemma

The Activist Investor Dilemma

Thesis: You have always had great interest in financial matters and investing in other companies. In recent years, you have used family funds to invest small amounts in numerous companies. In time, your returns have grown and now you are possessing quite considerable sums to invest. You believe that this success is due to your ability to recognize which companies have the greatest potential and at the same time are enjoying great management of their financials which allows them to grow their stock to a large extent in quite a short amount of time, which in turns earns you a significant amount of money.One company that has recently gained your interest is a one that deals with the manufacturing of electronics. This is not a very large company but their products are excellent and you believe they have great potential for growth in the market.

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The blog which you have kept to document your success has quite the following at this point. Many people look up to you for financial and investment advice, being confident that you always  give out the best possible advice. You have decided that you want to invest in this electronics company. Quite a considerable sum of your fortunes are now invested into this company.

However, you have a strong disliking of how the company is managed. You see how much potential is has for growth but because of the less than ideal financial management that is taking and some of the uninspired decisions that are being made by the leadership, the results are currently not very good compared to your other investments. It’s very frustrating to you because you know you would do a better job managing and leading the company, but unfortunately, you don’t have that opportunity.

You express your frustration about these matters on your highly popular personal blog and all the people there, who are also very much into investing, declare that they have much confidence in you and that they’re certain you would make a better leader that any of the current leadership. Time passes and you use this time and your popularity to form a group of financial investors which is led by you. You intend on taking the role of an activist investor in the company in order to gain control of most of the company’s shares and board of directors, which are currently under the influence of the people that founded the company. With your influence over many investors, you have devised a scheme for taking control of the company.

You are confident that you would do a better job than them even though you don’t have any real experience with actually running a company and not just investing in it. Your activism investing efforts would result in taking away the control of the company from its founders which have invested their life’s work and fortunes in it. But you think you’d do a better job for everyone involved, even if your actions could endanger the financial stability of the company. Still, you’re not sure if you’re doing the right thing or not. Now you are pondering the dilemma you’re in and the choice you have to make. You can take a for action approach and take control of the company from the people that funded it and manage it yourself, or you can take an against action approach and not do that, remaining a simple investor.

For Action: You take control of the company

Perspective One – Responsibilities from Rights

• Society would be benefitted if the decision were universalized for the same circumstances.
• If this decision would be universalized, it would produce desired results.
• By protecting their investments, this decision protects people’s right to safety.

Perspective Two – Social Consequentialism

• This decision results in the greatest amount of good for the greatest amount of
• This decision enables both the interests of the company and my personal goals to be effectively met.
• I feel that the end results of the decision not the decision in itself is the ethical outcome.

Perspective Three – Altruistic Justice

• This decision maximizes my happiness.
• This is the right decision because if universalized it would be desirable for those affected.
• The employees and members of the community would feel that the decision was made in the interest of the organization while considering their well-being.

Perspec……….

Against Action: Do nothing and remain a simple investor

Perspective One – Responsibilities from Rights

• This decision does not impede the ability of those impacted to succeed.
• This decision ensures all individuals are treated with respected and protected from injury.
• I am willing to have someone else use this reason in deciding how to treat me.
• Society would be benefitted if the decision were universalized for the same circumstances.

Perspective Two – Social Consequentialism

• This result is good because it promotes those goals which are part of human well-being.
• If all people were valued equally, this decision would be considered desirable.
• This result is good because the outcome of this decision is one that results in overall good.
• This result is good because it promotes the greatest amount of benefit for the greatest amount of stakeholders.

Perspective Three – Altruistic Justice

• This decision does not hurt others.
• This decision recognizes that what is right preempts what the majority desires.
• This decision promotes due process for the concerned parties involved.
• I am willing to have someone else use this reason in deciding how to treat me.

Perspe…………