Curb Your Enthusiasm: The Rise of Hedge Fund Activist Shareholders and the Duty Of Loyalty

Shareholder activism has been a growing problem in the corporate world, creating numerous dilemmas for the board of directors of companies. Activist shareholders can unsettle a company, pressuring the directors to make decisions according to the course of business the activists would prefer, and thus interfering with the traditional role of directors as the decision-makers of a company. With this new development in the business world, legal scholars have been debating if this activism needs to be controlled and, if so, what measures can be taken to reach a balance. This Note examines the traditional corporate principles such as the shareholder primacy theory and the principle of “one share, one vote,” evaluating the benefits and the costs of adhering to these theories amidst the changing landscape in the business and legal world. This Note then proposes that the traditional concept of the duty of loyalty can be applied to activist shareholders, much like it has been applied to the directors and majority shareholders in the past, based on a fact-by-fact analysis