Institutional shareholders increasingly are taking on the role of powerful lobbyists for corporate interests, bringing relationships between companies and shareholders to a new frontier.
Joseph Suggs Jr., trustee of the $11 billion State of Connecticut Trust Funds and the Connecticut state treasurer, is a particularly strong proponent of such shareholder action.
In a recent speech, Mr. Suggs adopted a Kennedyesque point of view about the duty of shareholders: ask not ONLY what your company can do for you, but what you can do for your company.
After outlining the corporate governance changes his fund wants from corporations in which it holds stock, he raised a question not often raised by pension fund trustees:
"How can we assist corporations? We can reinforce management's point of view when legislative issues like environmental, health care and (product) liability legislation is under consideration in Congress or in local legislative bodies. Company costs are our costs. Company success happens to translate to our success. As pension fund trustees and institutional holders, we can be the best advocates and the best allies for our companies to the extent that we all understand that we are in this together and it is really our company."
For instance, last year fund officials communicated with Connecticut Sen. Christopher Dodd, chairman of the Securities subcommittee, that the executive compensation issue should not be addressed by Congress but disclosure rules should be regulated by the Securities and Exchange Commission's proxy reform. The fund also testified on behalf of the Council of Institutional Investors about the abuse in frivolous suits against corporations.
The council also has rallied behind corporate America against the Financial Accounting Standards Board's proposal that stock options be charged against earnings.
As communication among corporations and large shareholders is enhanced by the new proxy rules and a recognized need for it on the part of many large corporations and institutions, large public funds in particular are standing up for corporate America on several key issues.
"We are and continue to be the best assets a corporation can have, whether in the state house or in Washington. The way it works is that we have to communicate. We have to understand that we have a commonality of interests. When the companies do well, we will do well," said Mr. Suggs.
Not surprisingly, corporate representatives who heard Mr. Suggs' speech, delivered at a conference sponsored by the Investor Responsibility Research Center, were pleased. "I applaud Connecticut's efforts at watching out for corporations' best interests, particularly in the legislative process," said Maryla Boonstoppel, vice president-investor relations and corporate secretary of Consolidated Freightways Inc.
Among other topics discussed at the conference was the role of boards of directors as a vital link to institutional shareholders.