In a column (subscription required) in Barron's, Ken Squire argues that we are entering a golden age for activist investing as legislators get serious about shareholder rights for the first time in history: "This enthusiasm for shareholder rights, coupled with distressed equity markets, means the sun, the moon and the stars have moved into alignment for activist investing."

In some ways he's right. Institutional investors will be more open to taking an activist stance as they look to salvage value at companies whose share prices are down by 50% or more. The continued growth in executive compensation against that backdrop will also aggravate many investors into action.

But as for a golden age, I'm no so sure. For all the talk about shareholder rights and corporate governance, most successful activist investors have made their money in recent years by buying up stakes in undervalued, under-performing companies and pushing them into the arms of strategy buyers or, up until recently, private equity firms. With M&A activity tanking, that option for unlocking value is mostly off the table.

The new test for activist investors will be whether they can generate value with a more long-term minded "conscientious owner" model that focuses on issues like executive compensation, proxy access, and managerial competence. Activist investors can make important contributions to corporate governance but absent the "strategic alternatives" route, it's unlikely to yield the short-term results that it did a few years ago. The days of activist investor as glorified investment banker are over, at least for now. The reinvention of activists is great for corporate America at large, but it might not be as lucrative for the activists.

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