The increase of hedge funds and other accumulations of capital has allowed some investors to manipulate the short-term stock price of a company to serve their own self-interests while damaging the well-being of long-term investors. They’re more like day-traders than those investors in it for the long haul. Their objective is often just to raise the stock price long enough to get out. Management and long-term investors must stiffen their backbones to resist such tactics, which are detrimental to the overall well-being of a company for seven reasons.

First, activists have the wrong time-horizon, focusing on the short-term rather than the long –term. Capitalism desperately needs managers to focus their attention on creating value for their customers and the economy through sustained effort over the medium-term. Activists pursue the maximization of shareholder value as reflected in the current stock price, which leads to negative results, such as destroying real shareholder value. According to Marc Benioff, Chairman and CEO of Salesforce [CRM], this theory of business is “wrong. The business of business isn’t just about creating profits for shareholders – it’s also about improving the state of the world and driving stakeholder value.” He has been joined by others in criticizing the goal of maximizing shareholder value, including former chairman and CEO of General Electric Jack Welch, Vinci Group chairman and CEO Xavier Huillard, CEO of Unilever Paul Polman, and co-CEO of Whole Foods John Mackey.
Second, the goal of activists, to extract value from companies for shareholders, is wrong. Rather, the goal of companies should be to create value for their customers and the economy. The Economist writes that shareholder capitalism should focus on growth and creation, not just divvying up profits. Activists turn capitalism into extracting value from companies and dividing it