7/7/2026
Commentary: When Shareholder Activists Attack a Company, its Rivals May Feel the Heat too and Change Their Ways
The Conversation (07/07/26) Shaheen, Hadi; Kim, J.H.; Goudarzi, Kamyar
Professors with the College of Charleston say, "Shareholder activists are investors who leverage their ownership in a company to push for change. When those activists engage a company, they usually want managers to change strategy, cut costs, improve performance or address issues such as climate change and worker rights. If managers resist, activists may seek board seats, call for leadership changes or criticize the company. When one company is under fire, its competitors may fear that they’re next. Their managers may respond by cutting costs, changing strategies or making public promises even before an activist investor shows up at their door. In other words, shareholder activism can create what our team of business school professors calls “collateral impact”: a domino effect in which pressure on one company changes what its competitors are doing. Consider what happened after a small activist investor, which owned only a 0.02% stake in Exxon Mobil (NYSE: XOM), successfully pushed the company in 2021 to take its climate commitments more seriously. Many of its oil industry rivals, including Chevron (NYSE: CVX), set more ambitious goals for lowering their carbon emissions soon after. Something similar happened in tech. In 2022, Altimeter Capital engaged Meta (NASDAQ: META), the company that owns Facebook, Instagram and WhatsApp, claiming it was hiring too many employees and investing too heavily in the metaverse, an immersive online technology. Meta responded by cutting thousands of jobs and investing less in the metaverse. Shortly after, Amazon (NASDAQ: AMZN) announced its own big round of cost-cutting and layoffs – although no investor activists had engaged it on similar issues. While these moves may appear to be separate decisions made by some of the biggest publicly traded corporations in response to different issues, our study in the Journal of Business Research, published in May 2026, suggests they are part of a larger pattern. We found that when one company changes course in response to activist pressure, its competitors frequently follow suit – even when activists have not engaged them directly. Activist investors use an array of tactics. They may meet privately with executives, submit proposals for a vote, publish open letters or try to replace board members. This pressure can damage a company’s reputation, restrict its decision-making freedom, restrain executive pay or even threaten senior leaders’ jobs. Financially motivated activists may push a company to cut costs, sell parts of its business, return more money to shareholders or avoid risky investments. Socially motivated activists primarily call for stronger action on climate change or other environmental issues, the protection of workers’ rights or other similar demands. When one company makes changes after an activist campaign, competitors might try to avoid becoming the next option by cutting spending, slowing expansion or changing their social and environmental actions, what’s known as corporate social responsibility, or CSR. Such moves might signal to investors that the company is well governed. Managers may make these changes because they worry about their jobs or the company’s reputation if activist investors turn their attention to them. To see whether an activist campaign against one company could also change what its competitors do, we followed companies in the S&P 1500, a group of large, publicly traded U.S. businesses, from 2006 to 2013. We followed a sample of 1,435 U.S. companies over multiple years, creating 16,334 company-year records. Each record represents one company in one year. Of these companies, 215 received at least one type of shareholder proposal during those years. We paid close attention to cases in which activist investors engaged a company and the company tried to meet those demands. Then we tracked close competitors to see whether they made similar changes. We found that competitors do often respond, but not always in the same way. When financial activists pushed one company toward greater financial discipline to boost short-term returns, competing companies tended to launch fewer products and announce fewer market expansions. They also scaled back their corporate social responsibility efforts. We think one explanation is that such campaigns clearly warn managers across the industry: focus on the bottom line, or you may be engaged next. Managers may worry that ambitious growth plans or CSR efforts will be portrayed as expensive, risky or wasteful, so they cut them back before facing direct pressure themselves. Interestingly, when activists pressured one company on social or environmental issues, such as climate change or labor rights, its competitors generally reacted differently. They still became more cautious about growth, since aggressive expansion could be seen as diverting resources away from social and environmental commitments, but they increased their CSR efforts instead. Social and environmental campaigns send a different warning: Protect your company's reputation and respond to public expectations, or you may become the next option. In short, different kinds of shareholder activist campaigns can move competitors in opposite directions. The collateral impact was strongest when the engaged company was a close rival. But greater rivalry did not affect every decision in the same way. Its clearest effect was to constrain initiatives, such as launching new products or entering new markets. These decisions are often costly and uncertain. The closer the competitor that faced activist pressure and pulled back from growth, the more managers appeared to take the warning seriously and were likely to reduce their own growth plans. Closer rivalry, however, did not make companies more likely to change their corporate social responsibility efforts. One reason may be that those decisions are shaped less by rivalry and more by broader concerns about legitimacy, reputation and public expectations. Stock ownership patterns also played a role. Companies with more long-term institutional investors were less likely to make quick cuts to growth after financial activism changed a rival’s behavior. We believe that’s because patient investors may give managers more freedom to continue long-term plans. We also found that company reputation mattered. Well-known companies seemed more sensitive when activists engaged one of their rivals and reacted most strongly. Following a rival’s brush with financial activism, more reputable businesses were more likely to reduce their CSR initiatives. However, they were more likely to increase their CSR efforts if their rival was engaged by socially motivated activism campaigns. We think that because reputable companies face greater scrutiny, they may be more sensitive to activism against a rival. Although our findings suggest that shareholder activists can influence many companies with a successful campaign that took aim at just one corporation, those activists also need to be wary of unintended consequences. A financially motivated campaign may push an engaged company’s rivals to cut not only growth but also their corporate social responsibility efforts. A socially motivated campaign may have a different effect. It may encourage the company’s rivals to respect labor rights or do more on issues such as worker rights, community support or the environment, but also make that engaged company’s rivals more cautious about growth. The lesson here for CEOs and managers is not to change course simply because they fear becoming the next option of shareholder activists. Instead, they can talk more openly with their shareholders, understand the concerns that some of them may express, and explain their short- and long-term strategies before outside pressure drives a rushed response. In business, the fear of being engaged next may be enough to change a company’s behavior before activists ever take aim at it."
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