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You've probably never heard of John and Lewis Gilbert. But as battles for good corporate governance once again capture the limelight, Fools shouldn't forget their legacy. These remarkable brothers were pioneers in fighting for shareholder rights -- sometimes quite literally.
Ahead of their time
According to a 2002 L.A. Times article written after John Gilbert's death, both he and Lewis took their roles as activist shareholders quite seriously. At one point, they held stakes in 1,500 companies, and in their heyday, they attended 150 annual meetings per year. Over 50 years, John Gilbert barraged his companies' boards with more than 2,000 shareholder proposals.
The Gilberts brought a Foolish, theatrical flair to their serious business of hassling unworthy corporate managers. When Mattel purchased Ringling Bros. and Barnum & Bailey Circus in the 1970s, John Gilbert wore a clown nose to the next company meeting, and passed them out to other shareholders. Famed comedienne Lucille Ball apparently was not amused over the brothers' criticisms of her Desilu Productions, either.
The Gilberts' spirited defense of shareholder rights sometimes got a bit physical. The L.A. Times article notes that Gilbert once wrestled a microphone away from a fellow questioner. On another occasion, he lost his glasses in a brief scuffle with the security guard trying to escort him from the room. While we Fools don't condone fisticuffs, you certainly can't say the Gilberts were dull.
The Gilbert brothers agitated passionately for corporate governance principles we still take seriously now: full disclosure of accounting information, independent boards, independent auditors, and cumulative voting. Their efforts against Transamerica in 1946 prompted the Securities and Exchange Commission to require that corporations include shareholder proposals in proxy statements. (To this day, shareholder proposals make darn good reading.)
A gaggle of gadflies
The Gilberts' legacy lives on in the many gadflies and rabble-rousers who still aim to shake up the managers and boardrooms of corporate America.
Carl Icahn may have a reputation as a corporate raider, but he's also spoken out for better corporate governance. Icahn's currently immersed in a battle with Genzyme (Nasdaq: GENZ ) , where he's trying to oust four directors from the company's board, including the company's CEO. He's also trying to take over Lions Gate (NYSE: LGF ) , complaining about management's "misguided" strategies and neglect of shareholders' interests.
The Corporate Library's Nell Minow is another tireless proponent of good corporate governance (and one of my all-time favorite speakers here at the Fool). The media has awarded her such colorful monikers as "The queen of good corporate governance" (BusinessWeek) and "The CEO Killer" (Fortune). Corporate managements should quake when Minow points out their unreasonable levels of pay, perks, and other rotten policies -- and shareholders should take these real signs of risk just as seriously.
The Motley Fool has its own history of advocating for shareholder rights. The Fool vocally supported Regulation Fair Disclosure in 2000. Last month, Tom Gardner testified before the House Financial Services Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises regarding corporate governance and shareholder empowerment.
You may also have run across one of the many shareholder proposals filed by John Chevedden over the years. My Foolish colleague Toby Shute reported that Apache (NYSE: APA ) recently pushed back against Chevedden's shareholder-rights advocacy in a legal case. Devon Energy (NYSE: DVN ) , Union Pacific (NYSE: UNP ) , and Staples (Nasdaq: SPLS ) have all cited the case in their own attempts to repel proposals by Chevedden and an affiliated investor. Investors should carefully note that rotten turn of events, and any other shareholder-unfriendly moves from the companies they own.
That buzzing you hear is the sound of change
The dictionary defines a gadfly as "a person who persistently annoys or provokes others with criticism, schemes, ideas, demands, and requests." Shareholder activists definitely fit that definition.
Such gadflies doubtlessly aggravate complacent corporate managers. However, many of those executives' out-of-control hubris and lack of respect for investors is no less irksome to shareholders. If I have to choose between two irritants, I'll side with the people pushing for reasonable corporate governance any day.
Three cheers for the memory of John and Lewis Gilbert, and all the gadflies who've buzzed along in their wake. We need more independent thinkers who dare to challenge a dysfunctional status quo, have the guts to ask the right questions, and will speak out for shareholders' rights. While the journey the Gilberts began may be far from over, their clown noses and microphone fights helped pave the way for others to follow.
Check Fool.com every Wednesday and Friday for Alyce Lomax's columns on corporate governance.