It is usually difficult to determine whether or not activism results in anything positive because, more often than not, we cannot directly link good subsequent firm performance to increased activism. According to one study commissioned by CalPERS, Steven Nesbitt of Wilshire Associates conducted a before-and-after analysis of 42 firms that were targeted for reform by CalPERS. After being targeted, the aggregate stock returns of these 42 firms over a five-year period were 52.5 percent higher than the returns of the S&P 500 Index. Prior to being targeted , these same firms had underperformed the S&P 500 by 66 percent over a five-year period.  Michael P. Smith of Economic Analysis Corporation conducted an independent study of CalPERS activism, and found that the combined gain to CalPERS for its activities toward 34 targeted firms was $19 million during the 1987 “1993 period, while the total cost to its monitoring was only $3.5 million.  His evidence suggests that CalPERS's activism pays off.
However, there is also plenty of counterevidence. For example, in one academic study, the authors found that the submitting of shareholder proposals did not lead to any obvious improvements in firm performance ”even for those firms in which the proposals were passed.  Even the practice of targeting looks questionable. For example, in a study that examined the effects of targeting by the CII, the authors found no subsequent improvement for the targeted firms and very little evidence of the efficacy of shareholder activism.  Due to the inconsistent evidence, we find ourselves having to make the same conclusion. That is, we don't really know if activism pays off. Perhaps one of the main problems is that activism has its own set of shortcomings in the current environment, which may partially explain why it seemed absent before and during the recent corporate crisis. We discuss these shortcomings next .