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The Asian financial crisis serves as a timely reminder of a fact too often overlooked: Merchant banking is the leading edge of shareholder activism. Indeed, one of the chief traits shared by hard-hit Pacific Rim economies is a decided lack of such activism. As a result, their companies are less prepared than they might be for global competition. To one degree or another, much the same holds true in other markets abroad.

U.S. companies, in contrast, have seen their competitive ability markedly strengthened by shareholder activism. And much credit goes to merchant banking--that is, private investors managing their own capital. True investor activism as practiced by such financial buyers has created a new model for American enterprise. That model is based on highly leveraged capital structures, on compensation and equity ownership that align the interests of managers with owners, and on effective corporate governance mechanisms to monitor and control the use of free cash flow. All......

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Approximate Pages: 3 (250 words per double-spaced page)

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