For most of his long career as a Wall Street attorney, Martin Lipton has been the man to call when companies find themselves under attack. He is a master tactician, famed for his ability to outfox the wiliest corporate raider or hostile bidder.

Now in the sixth decade of his career, the takeover defence attorney is fighting as hard as ever. Yet despite his efforts, today’s activist hedge fund managers are having great success in forcing their demands on reluctant companies.

The intellectual winds have shifted after a decade book ended by the Enron fraud and the financial crisis and characterised by a drip of revelations on boardroom pay and perks. Institutional investors have been persuaded that company management has no monopoly on wisdom and that boards meant to oversee them might themselves be in need of oversight. “I’m in a minority, yes, but I wouldn’t say that I was beleaguered,” Mr Lipton says with a note of defiance.

More hedge funds today are styling themselves as activists - and they are notching up significant victories. Their demands can vary widely, from the sale of a company to share buybacks to an operational shake-up. They may apply their pressure in private, as Jeff Ubben’s ValueAct did to ease out Steve Ballmer as chief executive at Microsoft. Or they may do so in public, as in Nelson Peltz’s campaign to make PepsiCo split off its snacks business. But they have in common a belief in their analysis and a determination to force change, even if it means storming their way on to corporate boards.

Success has attracted more money to the sector. Assets sit at a record $74.2bn, according to eVestment - and with Bill Ackman’s Pershing Square teaming up with a hostile bidder for Botox maker Allergan this week, the activists’ ambitions are growing.

The legal, regulatory and intellectual skirmishes taking place behind the scenes are setting new rules, which are shifting the odds in favour of the activists and away from the corporations.

There are a half dozen or more of these fights raging. At issue are the acceptable use of poison pills, changes to corporate voting rules and the arcana of company bylaws, the role and power of proxy advisers and what hedge funds must disclose about their stake-building - and when.

“I’m still prepared to do the best to make sure that the playing field level,” Mr Lipton says. “We’re not asking for protection.”

In this debate, the playing field that is level to one man is uneven to another. “The first wave of attacks on activism focused on convincing shareholders that active shareholder engagement was somehow bad for them,” says Barry Rosenstein of Jana Partners, which has taken on managements at Safeway, McGraw Hill and Agrium, among others. “Having failed at that, defenders of underperforming boards have launched a second wave focused on rule changes and technical defences. In the long run I doubt this will be any more successful.”

“Virtually every activist attack involves reduction in assets, reduction in invested capital, reduction in R&D, reduction in future capex and, most significant for the economy, reduction in employment,” says Mr Lipton. “Is it good, appropriate national policy to permit Carl Icahn to scream at one company after another to try and get them to do something that will create profits for Carl Icahn?”

On the other side, activists’ supporters say a company’s owners need to be engaged for capitalism to work efficiently. The activists add that they have longer-term horizons than traditional fund managers who are obsessed with quarterly performance.

What Mr Lipton is to corporate defence work, Paul Roth is to the activists. Known as the ‘dean of the hedge fund bar’, Mr Roth says activists tend to show up for a reason - and with a plan.

“Companies that are doing poorly are the ones that tend to get targeted,” says Mr Roth. “A well thought out business plan for a company that has become somewhat entrenched in its thinking can result in all shareholders over time becoming substantially enriched.”

Both sides profess to want a dialogue of ideas. But how sensitive directors are to shareholder opinion can depend on how easy it is for shareholders to vote them out if the board stands in their way. For this reason, activists and the largest institutional shareholders have joined forces to fight for better tools to unseat directors.

In this, the Securities and Exchange Commission tried but failed to help. It proposed in 2010 that dissident shareholders be allowed to place their own nominees on the ballot for board elections. But the US Chamber of Commerce and the Business Roundtable mounted a successful legal challenge. Fights for proxy access are instead sporadic, company by company.

Calpers, the California state pension fund, has also been putting resolutions to annual meetings demanding boards institute majority voting for elections so that unopposed directors must win at least half the vote to secure their place. While 84pc of S&P 500 companies now have majority voting, the number is well below half among smaller companies.“Suffrage is being fought for in the land of the free and the home of the brave,” says Anne Simpson, head of corporate governance at Calpers.

There is even tussling over how exactly the rules get changed. Boards can usually change corporate bylaws unilaterally but if shareholders want to alter them they require a supermajority, which is difficult to achieve.

Schulte Roth Zabel, Mr Roth’s firm, sued directors of Bob Evans Farms, the restaurant chain, in January on behalf of activist Sandell Asset Management after the Bob Evans board overturned bylaw changes that had just been approved by shareholders. That case settled when the company reversed course. Lawyers are now looking for another opportunity to test the issue in court. It is not just the US judicial system that can arbitrate these skirmishes. When Wachtell Lipton, Mr Lipton’s firm, was hunting last year for ways to repel activist advances, it hatched a plan that would make it harder for them to nominate alternative board candidates. The manner of its defeat revealed the power of another body that has its finger on the scales: Institutional Shareholder Services, a proxy adviser.

What happened? Activist hedge funds fighting for board representation have typically paid their candidates a fee to stand for election, given the time and potential bruises involved in a bitter proxy fight. But when two hedge funds, Jana and Elliott Management, proposed last year that they would also pay some of their nominees a bonus if the funds made money, institutional investors grew nervous about diverging incentives and disharmony in the boardroom. Sensing an opportunity, Wachtell Lipton proposed that companies ban director candidates from taking any payment at all, even a fee to stand. It drafted a bylaw provision that had been adopted by three dozen companies within a few weeks.

ISS is the largest of the proxy advisory services, which recommend how shareholders should vote in director elections, say-on-pay votes and the panoply of shareholder proposals that come up at annual meetings. Many small pension funds and institutional investors without the resources to assess every vote typically follow the recommendations of ISS or rival services such as Glass Lewis. Some recommendations are estimated to have the ability to influence up to one-third of the votes at certain companies.

ISS went into battle against the Wachtell Lipton plan. It recommended withholding votes for the re-election of directors of Provident Financial, one of the first companies to adopt it. Faced with this nuclear option, Provident backed down. Of the 33 companies that adopted the bylaw, two-thirds have since reversed course. Mr Lipton concedes the idea has died.

ISS has signalled it will use its power again. Directors of boards that ignore shareholder votes will find themselves with a negative recommendation when they are next up for election, it says. That could sharply alter the balance of power between boards and shareholders.

The proxy advisers’ increased leverage, and greater determination to use it, has put them in the line of fire of corporations and their lobbyists, who have been trying to persuade the SEC to curb their power, or at least to complicate life for them by bringing them under new regulatory oversight.

“The question is whether ISS, which owns no stock, should have the power of a $4tn voter,” a Wachtell Lipton partner told a roundtable convened by the SEC last December.

ISS says its policies on corporate governance issues reflect its regular surveys of institutional investors, hedge funds and companies. Critics say ISS is squarely in the activists’ camp. The SEC is considering rules that would force the company to be more explicit about whether it is doing consulting work for the hedge funds, on whose proposals it is also making recommendations.

Chris Cernich, an ISS director, insists it makes such disclosures to clients already and has Chinese walls between its research and consulting divisions. “Hedge funds are pretty frustrated with us a lot of the time, too,” he says. “We recommend against a lot of hedge funds, including hedge funds that buy research from us.”

Wachtell Lipton also appealed to the SEC to force activists to come clean about their stake-building earlier. Funds have to publicly reveal a stake of more than 5pc but they have 10 days to do so after passing that threshold. Together with buying during that grace period, Mr Ackman and other activists targeting JC Penney in 2010 suddenly emerged with 27pc of the retailer under their control. The idea of speedier disclosure rules has been supported by Dan Gallagher, an SEC commissioner, and by Leo Strine, the chief justice of Delaware, where most large public companies are incorporated. Mr Lipton’s pessimism over battles behind the battles is the result of a December speech by Mary Jo White, the SEC chairman, in which she lauded activists. “It was not so long ago that the ‘activist’ moniker had a distinctly negative connotation,” Ms White said. “It was a term equated with the generally frowned upon practice of taking an ownership position to influence a company for short-term gain. But that view of shareholder activists, is not necessarily the current view and it is certainly not the only view.”