Investors Fighting Mad

Editor's note: This is the first in an occasional series exploring the rise in shareholder activism and its impact on U.S. corporations amid the economic downturn.

Just a half decade after the stock market recovered from the collapse of tech stocks, the bursting of another asset bubble -- in housing and credit -- is refocusing scrutiny on the large executive-pay packages at underwhelming companies.

A revolution that started simmering in the post-Enron era has boiled over, with a new generation of shareholder activists determined to change the corporate status quo. Empowered by rich financial backing, an explosion in digital communications, friendlier laws and regulations, widespread discouragement with the stock market and a sea change in public perceptions, these activists are rattling the walls of corporate boardrooms like never before.

"This is shaping up to be the busiest year on record for activist investors," says Chris Young, director of M&A research with RiskMetrics Group, a firm that advises shareholders on proxy matters. "Some predicted the credit crunch would end the rise in activism that we've seen since the governance revolution began at the beginning of this century. Our opinion was that a slower economy or weakness in the stock market is likely to lead to an increase in activism, and that's exactly what we have seen. There are a lot more targets to go after now, and the investor community gets frustrated and more receptive to activists' proposals at a time like this." ...