Mention the name Carl Icahn to a CEO and you will see a combination of fear and anger. That's the way Icahn likes it.

On its face, his formula is simple. First, locate companies that are ailing, yet have strong underlying fundamentals. Buy a big piece of the company and then announce the possibility of a proxy fight if actions are not taken to enhance shareholder value.

Recent targets include Blockbuster Video (NYSE:BBI), Mylan Laboratories (NYSE:MYL), and Temple-Inland (NYSE:TIN).

In light of Icahn's success, other investors are trying to replicate the formula. In fact, this appears to be an area that hedge funds are now starting to target.

Last week, we saw evidence of this when an investment fund, Relational Investors LLC, announced -- through a 13-D filing -- that it had purchased 5.5% of Sovereign Bancorp (NYSE:SOV). Actually, the Securities and Exchange Commission filing looks like it came straight out of Icahn's playbook.

Relational Investors claims that Sovereign stock has "persistently traded at a severe discount to those of the company's peers." Why? Relational Investors believes that Sovereign's operating performance is quite low; management has had a chronic lack of credibility with analysts and institutional investors, and there have been bad acquisitions as well as poor corporate governance practices (especially with board compensation).

Relational Investors does offer strategies to improve shareholder value: reducing debt, improving operations, curtailing acquisitions, improving capital ratios, restructuring executive compensation, improving investor communications, and so on.

True, such changes would be welcome. Yet the fact remains that Relational Investors does not have much leverage to effect change. After all, with a market cap of $8.1 billion, Sovereign is too big for a hostile takeover.

Instead, Relational Investors is left with the option of a proxy fight. If successful, it would get two board members. Over time, this is likely to have some impact. There are seven members on the board: Having activist outsiders on the board would certainly bring critical issues to their attention.

While it is good to see investors agitate for change (most institutional investors remain passive), it doesn't mean this automatically results in immediate appreciation in the stock price. On the 13-D filing from Relational Investors, Sovereign's stock price increased nominally.

Unless the agitator has a track record like Carl Icahn's, or has lots of firepower (to follow up with a hostile takeover), such activist moves will take time. But, if you're an investor in Sovereign, at least you have some assurance that an investor will take the time and effort to use shareholder rights to push for change.

Fool contributor Tom Taulli does not own shares mentioned in this article.