Activists use shareholder meetings to propose … hmmm … unusual ideas for how corporations should behave.
Anyone who holds $2K worth of stock can go to an annual shareholders meeting, and propose just about anything they like. So if an activist group can hold their nose and make a little investment, they can raise some media attention that may be worth far more than $2K.
Until 1970, the SEC had a rule that companies could exclude from proxy ballots any shareholder resolution introduced “for the purpose of promoting general economic, political, racial, religious, social or similar causes.” The agency’s rule followed the seminal case of Dodge v. Ford Motor F 4.02 % Company (1919) in which the Michigan Supreme Court declared that “a business corporation is organized and carried on primarily for the profit of the shareholders.” …
Last year, according to the Manhattan Institute’s ProxyMonitor.org database, 47% of all shareholder resolutions on the proxy ballots of the largest 250 American companies by revenues involved social or policy concerns unrelated to share value. The issues included corporate political spending, environmental issues and animal rights. Since 2006, these companies have faced 1,150 such proposals …
Still, the SEC should revisit its broader rules about social or policy questions on corporate proxy ballots. Not one of the 1,150 shareholder proposals concerning social or policy issues since 2006 got the support of a majority of voting shareholders over board opposition. [emphasis added]
I added that emphasis for a reason: if these resolutions are never passed, then it’s not just that they are made to garner attention, but that they are only made for the free media attention.
Here’s an example:
Public-employee pension funds headed by elected partisan officials—most notably, those for New York City and state, respectively led by comptrollers Scott Stringer and Thomas DiNapoli—exploit the proxy process to browbeat companies into leaving trade associations and other groups that the officials view as unhelpful to Democratic Party interests.
This needs to end: can you imagine if corporations were allowed to submit proposals on live TV at the Democratic Convention? I didn’t think so.
The Manhattan Institute maintains a database of shareholder resolutions. at proxymonitor.org.
Read the whole thing, entitled “Get the Politics Out of Proxy Season”.