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Union and public pension funds, the most prolific institutional activists employing low-cost targeting methods, are often accused of pursuing private benefits. Extant literature finds that unions representing workers, as stakeholders, are not aligned with shareholders. Limiting shareholder power may mitigate “special interest” activism but can also exacerbate managerial agency problems. We examine the director labor market in two different settings, majority approved and withdrawn shareholder proposals, where conflicted activists arguably have additional leverage over management, and find evidence that corporate governance can selectively mitigate the negative influence that conflicted activists have over firms without stifling all influence of low-cost activists.

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