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Opinion

Activism rules, OK!

What are shareholders to do? Sit back and allow the board to make obvious mistakes and lose them money? Or use their rights as shareholders to make the board take notice and maybe make some money? Dysfunctional corporate management has had too easy a ride from institutional investors.

What is wrong with hedge funds taking an activist approach to corporate management? When Deutsche Börse CEO Werner Siefert was ousted in May, for example, German chancellor Gerhard Schröder called for an immediate three-month investigation, and the chairman of the ruling SPD, Franz Müntefering, branded the hedge funds responsible as "locusts".

Now that auto maker DaimlerChrysler looks set to experience the same no-nonsense attitude from activist hedge funds (why not just call them shareholders?), the SPD is up in arms again.

But surely the politicians can see that DaimlerChrysler and its managing board need to be kicked into shape. After all, the company's share price has slumped by half over the past five years, largely as a result of the Mercedes-Benz Smart Car venture, which has cost the group about €3.3 billion.

What are shareholders to do? Sit back and allow the board to make obvious mistakes and lose them money? Or use their rights as shareholders to make the board take notice and maybe make some money? And if they can't manage it alone, how about letting someone else take up the reins?

Activism is considered by some to be a dirty word only because, until recently, docile mutual funds had been the dominant shareholders, allowing corporate executives to carry on regardless when the going got tough.

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