Watch Those Investors
from November/December 2006
Is increasing shareholder influence good or bad?
You wouldn't mind their participation, if only they knew what they were talking about.
I think the trend is good, as long as activism comes with substantive information about the business. If this becomes a wave of political correctness, that sort of process-over-substance activism is dangerous because it distracts people from the focus of the business. Also, some of these shareholder-proxy advisory services have an objectivity problem, in that when you score badly on something you are invited to hire them so you can score better. The conflict there is manifest.
Paul W. Hobby, 46
Founding Partner, Genesis Park LP, Houston
EGL Inc., NRG Energy, Stewart Information Services
Good. It’s an evolution whose time has come. Anything to make the board less insular is good, though there may be some silly things done as it sorts itself out. The pendulum may swing too far before it settles on an appropriate point.
Robertson C. Jones, 62
Retired Senior Vice President and General Counsel, Del Webb Corp., Phoenix, Arizona
Insight Enterprises Inc.
There seems to be some view that corporations are democracies—one man, one vote. But they never were, and there’s not a corporate law that says they are. They are more like Roman republics than democracies. When you think of a shareholder democracy, you get the idea that people are well advised and have studied all sides of an issue in preparation for a vote, but that’s rarely the case.
James M. Papada III, 58
Chairman and CEO, Technitrol Inc., Trevose, Pennsylvania
There’s that old joke—you should look for a one-armed economist so he can’t say “on the one hand” and “on the other hand.” On the one hand, shareholder influence shows a positive spillover of Sarbanes-Oxley, and concern on the part of the shareholder. On the other hand, shareholders can be myopic about taking a one-year snapshot of the stock price, and then fall into the same trap corporate management does when all they do is focus on the stock price because that impacts their options package.
Scott M. Jenkins, 52
President, S.M. Jenkins & Co., West Conshohocken, Pennsylvania
Bryn Mawr Bank Corp., Covalent Group
It’s a mixed bag. Directors should first and foremost govern the company on behalf of shareholder returns; if they aren’t really doing this, then shareholder activism is warranted. However, activist shareholders with agendas other than financial returns are detrimental to the health of a corporation and have no place on a board. On balance, in spite of recent scandals in corporate governance, I think increasing activist involvement is detrimental.
Gilbert F. Decker, 69
Consultant, Los Gatos, California
Alliant Techsystems, Allied Defense Group
Shareholders have a right to have some influence, but in a public company the shareholders can always vote with their feet. The market’s there every day if they’re unhappy. They can move on. If they don’t like it, they can walk away.
Ann K. Newhall, 55
Executive Vice President, COO, and Director, Rural Cellular Corp., Alexandria, Minnesota
Alliant Energy
