Contrary to the conventional wisdom that U.S. business leaders view shareholder activism as a distracting or even a deleterious influence, a plurality of executives at the largest U.S. companies (50 percent) say  shareholder activism actually strengthens the health of public corporations, according to the Makovsky 2007 Corporate ePulse, underwritten by New York public relations firm Makovsky + Company and conducted by Harris Interactive.

When asked about the causes of ethical breaches in corporate America—including factors such as lack of personal integrity, compliant boards and insufficient monitoring and controls—executives most frequently cited one cause: the pressure exerted on corporate leadership by Wall Street to meet earnings forecasts and financial guidance (68 percent). Only 18 percent cited ignorance of today’s ethical standards as the reason.

“The survey shows that shareholder democracy cuts two ways,” says Ken Makovsky, president of Makovsky + Company.  “Most of the business leaders—who of course are often targeted by shareholder activism—appear to believe it has a positive effect on the health of the enterprise. On the other hand, we see a cautionary notice about the short-term goal orientation by which Wall Street regards corporate leadership. All of these issues point to the heightened communications pressures facing today’s leaders of public companies, challenges it would seem from the survey findings with respect to public relations that are taken seriously by most CEOs.”

Half of those questioned in the Makovsky survey said shareholder activism, defined as the desire or attempt to change corporate leadership, policy or strategic direction, actually strengthens public companies either a little or a lot, compared to 32 percent who said such initiatives threaten corporations and 18 percent who said they have no impact.

The survey found that 68 percent of executive respondents cited “pressure to meet published financial forecasts or Wall Street guidance” as a reason they believe companies act unethically, the number one factor ahead of lack of personal integrity (60 percent), insufficient monitoring and controls (47 percent) and ‘rubber stamp’ boards of directors (41 percent). 

More broadly, the survey suggests that external Wall Street pressure may exacerbate a high-expectation, mistake-intolerant American business culture. As a group, survey respondents said that “fear of admitting failure,” was almost as important in triggering ethical lapses as Wall Street pressure (the former cited by 51 percent of respondents.

More that two-thirds (68 percent) of the survey respondents said that their company’s CEO spends the right amount of time on external public relations (defined as speeches, press conferences, interviews for articles about the company); 22 percent (one in five) thought that their CEO spent too little time on PR, while only 10 percent said too much.