Exit, Voice and Loyalty from the Perspective of Hedge Funds Activism in Corporate Governance

This article discusses hedge funds activism based on Hirsch- man’s classic. It is argued that hedge funds do not create the loyalty concerns underlying the usual short-termism critique of their activism, because the arbiters of such activism are typically indexed funds, which cannot choose short-term exit. Nevertheless, the voice activated by hedge funds can be excessive for a particular company. Furthermore, this article claims that the short-termism debate cannot shed light on the desirability of hedge funds activism. Neither theory nor empirical evidence can tell whether hedge funds activism leads to short-termism or long-termism. The real issue with activism is a conflict of entrepreneurship, namely a conflict between the opposing views of the activists and the incumbent management regarding in how long an individual company should be profitable. Leaving the choice between these views to institutional investors is not efficient for every company at every point in time. Consequently, this article argues that regulation should enable individual companies to choose whether to curb hedge funds activism depending on what is efficient for them. The recent Europe- an experience reveals that loyalty shares enable such choice, even in the midstream, operating as dual-class shares in dis- guise. However, loyalty shares can often be introduced without institutional investors’ consent. This outcome could be improved by allowing dual-class recapitalisations, instead of loyalty shares, but only with a majority of minority vote. This solution would screen for the companies for which temporarily curbing activism is efficient, and induce these companies to negotiate sunset clauses with institutional investors

We need a European exit strategy for Covid-19 before it's too late

In the Covid-19 crisis, Europe is paying a high price for diversity, write Alessio Pacces and Maria Weimer. The failure to coordinate national public health responses in the initial stage of the outbreak has undermined both the fight to save lives and core European values and principles. But the fight against Covid-19 is a marathon, not a sprint. Going forward, Europe’s survival will depend on how it handles the exit from this crisis. The Commission has published a European Roadmap for lifting Covid-19 measures – member states must follow its recommendations before it is too late