It's often hard to believe that one person can make a difference, especially in the face of huge, intractable problems. But tenacious, dedicated individuals truly can accomplish amazing feats. Just look at all the strides toward better corporate governance that investors have made this year.
That's some rugged individualism
According to a recent blog post by RiskMetrics, individual investors filed 60.5% of majority-supported shareholder proposals in this year's past proxy season, outpacing other activist shareholders such as unions and public pension funds.
Gerald Armstrong, John and Ray Chevedden, William and Kenneth Steiner, and the Rossi family were identified as the most active individual investors filing winning proposals.
I guess these folks have some corporate managers running scared. That might explain a few of the hostile actions executives have taken against shareholder activists this year.
Apache Energy (NYSE: APA ) filed a lawsuit against John Chevedden over shareholder rights earlier this year. Devon Energy (NYSE: DVN ) failed to publish the voting results of Chevedden's proposal for majority voting, which 72% of shareholders supported. After shareholders made their displeasure known, Devon dropped its objection to the proposal and published the results.
RiskMetrics pointed out that activist shareholders often lack the resources that other organizations use to reach out to other shareholders or wage huge public relations campaigns. Yet individuals still have a track record of successfully agitating for more solid corporate governance at many companies.
Many of these folks have simply kept at it year after year, consistently challenging their fellow shareholders to vote for common-sense governance at corporations, including declassified boards, say-on-pay policies, majority voting, and board independence.
More shareholder successes
Majority-supported proposals shook up the top brass at companies such as Allstate (NYSE: ALL ) , Comerica (NYSE: CMA ) , and Whole Foods Market (Nasdaq: WFMI ) . Risk Metrics noted that some of these proposals even ventured beyond more standard demands like say on pay. For example, Comerica shareholders approved a measure to claw back management's unearned bonuses.
Unfortunately, fewer shareholder proposals demanding better corporate governance policies gained majority support this year: just 31%, versus 36.6% this time last year. The good news? This is still a major improvement over the rates of support in the previous two years (26.7% in 2008 and 23.6% in 2007).
Hopefully, more investors will pay attention to shareholder activists. Too many American investors have slacked off when it comes to holding corporate managers and boards accountable for their performance and behavior. Why do so many investors seem to automatically side with corporate managements, instead of listening to fellow shareholders' concerns about the long term?
Many investors, suffering from a serious trust deficit, seem soaked in apathy. They're too willing to believe that in "the free market," corporate managers do what they want, and nobody says "no" to bad policies or shoddy ways of doing business. In the face of such bad behavior, beaten-down investors just sell their stocks and let the damage commence.
The difficult path makes the difference
Sure, shareholder activism is no easy task. A recent Wall Street Journal piece followed one small investor's difficult foray into shareholder activism, noting: "Confronting insiders, who are richer and better-informed than you, will probably remain a lonely, lopsided battle."
The piece concluded:
Finally, several traits are essential to be a successful investor: intelligence, independence, skepticism, patience, discipline. To be a successful activist, however, you need at least one more attribute: stubbornness. If you are a quitter, the Don Quixote life isn't for you.
There may be some truth to that. Still, individual investors' success in chipping away at bad policies, despite the odds against them, shows that stubbornness and a passion for good corporate governance can pay off. These folks follow the legacy of other investors who pushed back at corporate managers to get better results.
Instead of focusing on how difficult it is to make a difference, we should remember the power of individuals and the marketplace. Apathy is never the answer.
Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on corporate governance.
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