Final answer:
An activist investor is a shareholder with a substantial amount of stock who actively attempts to influence a company's management and decisions to increase shareholder value. Shareholders are owners of a corporation focused on investment returns, while stakeholders have a broader interest in the company's impact. In public companies, shareholders vote for a board of directors based on the number of shares they own.
Step-by-step explanation:
A shareholder with a large amount of stock who seeks to influence management decisions is known as an activist investor. An activist investor engages with a company's management to encourage change within the company, which they believe will increase shareholder value. This can include altering the company's strategy, management changes, or financial practices. They are distinct from general investors or stakeholders because of their active involvement and intent to influence the direction of the business.
Shareholders and stakeholders are both important to a company but have differing roles. Shareholders, as noted by economist Milton Friedman, are individuals who own shares of a corporation and are primarily interested in seeing a return on their investment. Stakeholders, on the other hand, encompass a broader range, including employees, customers, and the community, who are impacted by the company's operations, not solely through financial investment but also through the company's broader activities and policies.
In a public company, shareholders own the company and vote for a board of directors. These directors then hire executives to manage the firm. The number of shares a shareholder owns determines the weight of their vote in corporate decisions. While no single individual often owns a majority of a large public company's stock, an activist investor does not necessarily need a majority to exert significant influence.