By Gary W. Findlay
Activist shareholders! Union dissidents! Political opportunists! Gadflies! Corporate insurgents! Blue states vs. Washington regulators!
I have to give credit where credit is due. The Business Roundtable and the Chamber of Commerce have done remarkable jobs of persuading the financial press that groups of corporate shareholders who object to mismanagement are nothing other than the lunatic fringe with hidden agendas targeted at everything but improving corporate performance. The emotion-laden lexicon that has evolved proves my point. I have yet to see a report on our initiatives that is in any way balanced. Representatives of corporate management have grown quite comfortable with a playing field that is not level and are intent on keeping it tilted in their favor and away from "concerned owners."
Imagine, if you will, an election for president of the United States where the incumbent party controls the ballot and the voting process — you, the electorate, are informed that you may vote for the one candidate listed on the ballot or, alternatively, just not vote. My guess is that this would (and should) result in a taxpayer revolt (more tea in Boston Harbor), yet this, as a practical matter, is what the owners of corporations are told when it comes to electing corporate board members, no matter how badly those board members may have performed in the past.
The CEO of one of America's largest companies personally told me if I did not like the way management is performing I should "vote with my feet" and just walk away from the stock (meaning, I suppose, that I should sell it to some unwitting victim). To me, this is indicative of the arrogance of management at some companies, treating investors as if we are only capable of one-step logic. As a long-term institutional investor, I'm looking for return from both stock selection and general changes in market value — I'm hoping that both will be positive. If I tolerate bad management by "voting with my feet," I have effectively limited my potential general market appreciation return by ignoring the negative impact on investor psychology that stems from any bad corporate performance.
In the mid-1980s, a number of "concerned owners" got together and formed the Council of Institutional Investors. Despite what advocates of the status quo would have you believe, most of us are from "red" states and we don't have political or social or pro-union agendas and we have no interest in telling corporations how to build and market light bulbs or automobiles. However, we are all fiduciaries, and we do want a voice in the selection of independent watchdogs (corporate directors) who will be positioned to align management interests with owner interests. (In other words, acquiring meaningful access to the proxy is a key objective.) Beyond that, our objectives include 1) full disclosure of information needed by shareholders, 2) reforming our securities exchanges, 3) assuring that executive compensation policies are aligned with the interests of shareholders, and 4) making white-collar crime a crime with consequences.
Regardless of how we are characterized by those who would prefer to see us fail, I hope thoughtful observers will understand and appreciate the efforts of "concerned owners" who are acting in their fiduciary capacity to protect and promote long-term shareholder value. It is further my hope that interested bystanders will rise to the occasion and support our initiatives to restore confidence in our capital markets. In the final analysis, I believe our activity will pass the ultimate test — simply put, it is the right thing to do.
Gary W. Findlay is executive director of the Missouri State Employees' Retirement System, Jefferson City.