DETROIT (TheStreet) -- General Motors (GM) - Get Reportdidn't give activist shareholders everything they wanted, but it did show that the auto giant has to at least be responsive to investor demands. 

Under the compromise settlement reached Friday and announced Monday, the No. 1 U.S. automaker agreed to raise GM's cash dividend and to buy back $5 billion GM stock, less than the $8 billion in shares proposed by Harry Wilson, representing four hedge funds that own GM shares. Wilson also had been seeking a seat on GM's board but that request was withdrawn, averting at least temporarily a proxy battle. The dividend move affirms what GM said it would do last month during its earnings announcement.

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Wilson and GM released a statement that exuded conciliation, with Wilson thanking the company, Chief Executive Mary Barra and the board of directors for a "win-win outcome that includes a thoughtful approach to critical capital allocation issues and other important measures to increase long-term shareholder value."

GM's deal reflects an acceptance that investors' time and patience aren't unlimited in terms of unfilled expectations. Looming in the background is the opinion of U.S. taxpayers who played, via the U.S. Treasury, a pivotal role in GM's reorganization.

GM said the share buyback will begin immediately and be completed before 2016 is over. The dividend increase will take place in the second quarter of this year.

Barra and the board saved face with the agreement of Wilson and the hedge funds to forego granting a seat on the board. At the same time, pressure on Barra and GM management to perform has been kicked higher a notch. No doubt other shareholders (and future shareholders) are paying attention more acutely to how well GM fares in labor negotiations this summer, how quickly the ignition switch safety recall is resolved - and how soon the company's untapped promise flows to the bottom line.

GM provided few additional details about the negotiations with Appaloosa, Hayman, Taconic and HG Vora funds, which collectively own about 2.1 percent of the automaker's equity. Wilson had been a member of President Obama's task force that financed and restructured GM during its 2009 bankruptcy.

The month-old initiative to pressure GM to alter its management of cash and investor payouts drew criticism from Warren Buffett, whose Berkshire Hathaway (BRK.A) - Get Report is another investor in GM.

GM termed its agreement a "comprehensive capital allocation framework" featuring "strong capital discipline" that will allow the company to increase returns to shareholders. The "foundational element," GM said, is returning all available free cash flow to shareholders while maintaining an investment-grade balance sheet, anchored with a "target" cash balance of $20 billion.

In the run-up to bankruptcy, GM was burning cash and borrowing heavily to keep operations and returns viable, which alarmed investors and sunk the company's credit rating. The credit crunch in the wake of the meltdown at Lehman Brothers forced GM to seek government assistance -- but analysts and investors, such as the late Jerry York, who represented Kirk Kerkorian, had earlier warned that GM's cash balance was sinking and could trigger insolvency.

With plenty of financial strength for GM due to government's replenishment of capital, a public offering of shares and five years of an improving automotive market, especially in the U.S., the activist funds were worried that the automaker was erring on the side of caution, clinging to financial resources too tightly instead of investing them or returning them to shareholders.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.