World Wealthiest Shareholder - Example

The paper "World Wealthiest Shareholder" is a perfect example of a report on finance and accounting. World wealthiest shareholders share some common similarities since they are credited for truing around the fortune of undervalued companies into value stocks. Their investment targets companies that are underperforming; their stocks are undervalued and have poor corporate governance and poor management. As such, sorting of such issues enables the companies to improve their stock performance, corporate governance, and stock prices.

Active investment programs take different timelines depending on the strategies of the active shareholder. Warren Buffet is known for making long-term investments for about ten years while there is a short-term investment like that of CalPERS on Lockheed. The change in the performance of the company during and after the active investment program depends on the length of the time taken by the shareholders in the company. This analysis shows the effects of three active shareholders on the performance of the companies they invested in.

Its dynamic involvement in active institutional investment commenced in 1984 when it took advantage of the lifted limitation of the state of California, which had previously limited its stock investment to only 25% of its portfolio. CalPERS grew into an active shareholder when the equity market was highly characterized by aggressive investing tactics such as aggressive acquisitions and leveraged buyouts. At that time pension funds took only 5% of the equities in the US market and they were able to raise the stake by investing more money into the stock market.

Despite the fact that most of the shareholders held huge holdings, they were consistently ignored by the management and were not allowed to vote their proxies and thus, did not take part in the corporate governance. CalPERS's expertise in financial investment was not only geared towards maximizing the shareholders’ value, but also to involve the board of directors in the discussion about the strategic direction of the company and also in the evaluation of performance. At around the late 1980s, CalPERS took advantage of the widely spread activities of firms that were prone to hostile Shareholder-unfriendly policies.

It was opposed to the poison pills, which were practiced in major companies such as the Lockheed Corporation. Through the shareholder’s resolutions, it sought to make the directors more independent and thus more active.