May

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Real Shareholder Activism - Where is It Now?

May 2, 2008 |

Back in 2000, when we discovered many of the Executives (CEO, CFO, CIO, CxO) where either directly cooking the books or looking the other way when their subordinates did so to please them, many shareholders felt they needed to take more control over the companies where they invested.

Generally, shareholders can exercise some control over the companies they own at the annual shareholders meeting. They do not even have to be there to have a petition voted on. They only need to raise a motion that is seconded by another shareholder before the deadline for the proxy voting ballot printing, and their petition is in. They can petition anything, within reason. You can request governance, transparency, limit compensation, change auditors, or anything else you may want.  I tend to be in favor of many of these.

I did liked many of the proposals I saw back in the 2000 era. Most of them where for the benefit of the shareholders. They where raised by people who cared about the company earnings because their financial stability depends on them.

Then, there are the hippie activist shareholders. Those who buy just a few shares — enough to raise motions that are against the shareholder’s interests. Motions that are not sincerely entered with the purpose of making more money, but to limit the ability of this company to make more money. Examples of these proposals are those seeking human rights, greener performance, and socialist inspired employee compensation.  I usually reject these proposals on proxy ballots.

Nothing wrong against those ideas. But if you raise them, be sincere: hold the stock! Hold it because you mean to see the company grow with your ideals.

Sure, you can argue you may want to own Exxon on the long term and change its course into a greener company. If you do, I would expect you to increase your position as time goes on. Not to buy 100 shares that you sell just after the shareholder meeting (probably having earnings on top of that).

I wish I saw more of the company growth oriented proposals and less of the hypocritical ones.


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