Subject: Stocks - Investor Rights Movement

Last-Revised: 24 Jun 1997
Contributed-By: Bob Grumbine (rgrumbin at, Chris Lott (contact me)

The investor rights movement (sometimes called shareholder rights or shareholder activism) involves people who try to use their shares to make publically traded companies more accountable to their shareholders. (Please don't confuse this issue with the topic of the rights of an individual investor with respect to the broker or brokerage firm in case of disputes, etc.) One of the most common goals that current investor rights activists aim for is changing the election process of company boards of directors so that each and every director is elected at once, as opposed to the stagger system that is commonly used.

This article will give you a sense of the flavor, color, and some of the directions of what's currently going on in the area of stockholder rights. The key points: (1) you must have your shares registered in your own name to have any real chance of participating; (2) having gotten your shares registered, you need to read in detail every proposal in the proxy statements sent by the companies (or by others in some cases), to determine how to vote your own shares; and (3) if you have the time and energy to attend some annual meetings personally, you yourself can become a stockholder rights activist, voting not only your own shares but any others for which you obtain proxies and, subject to certain rules and procedures, even having your proposal(s) printed in the annual proxy statements for other

shareholders to read and vote upon.

Ok, now the details. The absolute best sources of information about investor rights activists are the proxy statements which each and every one of the companies in which you own stock are required to send to you each and every year as part of their process of getting their in-house chosen directors elected. Some names stand out clearly as being the kind of people you are looking for.

Ever since I was knee-high to a ticker tape, I have admired the work of the Gilbert brothers and Wilma Soss, three of the longest-term most dedicated activists for investor rights ever to grace the annual meetings of major corporations. It has been more than 35 years since I was knee-high to a ticker tape, so Lewis D. Gilbert and Wilma Soss have both passed on. However, John J. Gilbert remains alive, well, and active in promoting the stockholder right of cumulative voting for directors, so that even in the most monolithic corporations held largely by trustees indifferent to the legitimate interests of the real owners of the shares, there can be elected at least some voice for the rights and interests of actual owners.

A more recent activist on the single crucial issue of reinstating the election of directors annually, instead of the stagger system, has been Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue N.W., Suite 215, Washington, D.C. 20037. As in fact it has been used in far too many instances, the stagger system facilitates incompetent or malicious managers keeping effective control of boards of directors for at least two years and sometimes longer beyond the time it becomes obvious to stockholders that the existing board is acting outrageously against the interests of the owners of the company. As she points out in one of her proxy proposals, "the great majority of New York Stock Exchange listed corporations elect all their directors each year" which "insures that all directors will be more accountable to all shareholders each year and to a certain extent prevents the self-perpetuation of the Board." Rationally behaving directors have no legitimate worry about getting elected every year. It is only those who are doing wrong against the owners, or who intend to do so, who have any need for the "stability" hogwash that so many staggered board companies spew forth as justification for their anti-stockholder provisions.

Along with the general purpose activists, there are frequently holders of stock in particular companies, sometimes even former officers or directors, who conclude that the current actions or inactions of the existing set of officers and directors are just plain wrong and need to be redirected or changed, usually in some quite specific ways. To find out about any of these you really must have your shares in all of the companies that you own registered in your own name, so that you yourself appear on the stockholder lists. To be sure, some of the better quality brokers do make an effort to pass along mailings which they are requested to send to you by the companies you own but in which they hold the actual shares. Even those better quality people are usually very delayed and you're going to miss most or all of the individual company activists who see brokerage house shares as being owned by people who just plain don't care about the real companies and who aren't likely to read or understand any of the issues involved. Rightly or wrongly, that does seem to be their view, and if you are someone who actually does care about the companies you own, getting your shares registered in your own name is the only way you're really going to have a chance of being kept informed about what's going on.

Along with some who really are, or who have purported to be, concerned about investor rights, you will also find many things included in the proxy statements which look to me to be part of an "investor wrongs" movement. I refer to things such as religious bigot groups insisting that no American company do business with the nationals of any nation which does not welcome their peculiar bigotries with open arms. I've run across (and seen in action at annual meetings) so many of those malicious anti-business twits, that I do feel the need to caution you that not every proponent of issues for the annual stockholder's meeting has even considered (1) the best interests of the company, (2) the best interests of any stockholders other than their own peculiar set of bigots, or (3) the fundamentally rational requirements for business organizations to do business anywhere, let alone on a multinational scale of activities. Just a cautionary note that I think desirable, having referred you to the proxy statements as a source of contacts.

For more information on shareholder rights and activism, try these sites:

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