Hedge Funds and Corporate Governance
Does having a hedge fund as a substantial shareholder improve corporate governance? Unlike other institutional investors, hedge funds are not afraid to (a) take large stakes in companies and (b) be activist in their ownership i.e., they attempt to exert influence on CEOs. A recent court case brought against Apple by one of its shareholders, Greenlight Capital, a hedge fund run by David Einhorn, nicely illustrates the way in which hedge funds try to influence companies in which they have stakes. Greenlight Capital is trying to get Apple to return some of its $137 billion cash pile (two-thirds of its balance sheet) to shareholders. Apple has been hoarding cash since 1995 and in 2012 paid its first dividend in 17 years. Apple has by far the largest cash pile of any corporation in the world - click here.