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It’s easy not to like corporate raiders, a.k.a. investment activists. Investors like Carl Icahn and Nelson Peltz have been called those names for taking large stakes in public companies and pressuring management to improve share-price performance, usually by cutting costs (largely by firing employees) and taking on debt for share buybacks and special dividends.

While these guys don’t merit statues in public parks, it should be acknowledged that as a byproduct of their self-seeking, they perform a valuable service. They serve as an antidote to the “agency” problem in corporate finance; the top managers of public companies are supposed to act on behalf of shareholders but instead, because they can get away with it, they ignore that fact and act like owners, taking steps to line their own pockets at the expense of the company.

Activist investors keep management alert to the need to satisfy shareholders because there’s always the possibility that some activist will swoop in and make life tough for underperforming managers and possibly get rid of them.

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