Good Economics Essay Example

Summarize

In the article, “Capitalism’s unlikely heroes” published in the magazine The Economist, writer has told that activist investors are good for the public company. These investors help entrepreneurs, promote innovation, and work as saviors in spite of their flaws. On the other hand, passive and lazy investors move out of the business upon any sign of trouble. Sadly speaking, number of lazy investors or institutional investors in the stockmarket is increasing. According to the article, governance can be weakened due to increasing number of passive index funds. Activists, on the other hand, are in the market for more than 30 years and they have at least $100 billion of capital. Initially, they were referred to as corporate raiders. Their role has been found supportive in winning other shareholders’ views. Although, activists are strongly opposed by public-company bosses due to their opportunism and anger, bosses are wrong in this thinking. Actually, activists have taken part in many important privately owned companies such as Apple, Microsoft, PepsiCo, and Procter & Gamble. They are playing an important role in the biggest preoccupation of boardrooms in America as, for example, an activist fund known as Trian successfully took a board seat at Bank of New York Mellon. According to The Economist, analysis of 50 largest activist positions is showing that capital investment, profits, and R&D have risen. Activists are also of value as they utilize less debt, get lower absolute fees, and pay no takeover premium. Mutual funds as well as pension funds become more active. Activists can help in giving new life to the underperforming companies. The Economist is of view that American capitalism can find that activists are for their betterment.