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Does a company you covet for your portfolio have a bullseye painted on it? Shareholder activists target some industries and companies more intensely than others, as a new database that tracks shareholder proposals reveals.
Identifying the biggest bullseyes
The Manhattan Institute's Proxy Monitor database pulls proxy data from Fortune 100 companies, releasing its fascinating findings free of charge. The database most recently revealed that between 2008 and 2010, ExxonMobil (NYSE: XOM ) , ConocoPhillips, Citigroup, JP Morgan Chase, and Bank of America (NYSE: BAC ) earned the dubious honor of being activist shareholders' top five targets.
In keeping with the frequently targeted companies named above, Proxy Monitor's staff found that the energy and financial industries receive the most shareholder proposals overall. These generally very large companies tend to attract loads of attention from shareholders, the media, and the general public alike.
Energy companies received an average of 15.5 proposals during the time frame Proxy Monitor tracked; that's not surprising, since oil and gas companies attract lots of attention related to social and environmental policies. Health-care companies were least targeted, with the average company subject to just 5.4 proposals; they are less likely to face scrutiny on social policies.
Proxy Monitor also filtered the data to see which companies drew the most flak from labor-union pension funds, a common form of activist shareholder. Unions most frequently targeted the retail industry, which represented 43% of the shareholder proposals they filed. Oddly enough, service-oriented industries like telecom and financial companies also came in near the top of the list, representing 38% and 32% of union-sponsored proposals, respectively.
These types of companies are lightly unionized, as opposed to more heavily unionized fields like manufacturing and energy, which union proposals targeted least.
Where activists have succeeded
Even more interestingly, the likelihood that shareholders will approve proposals appears to vary by industry. According to Proxy Monitor's data, the retail industry is the most likely to vote "yes" on proposals.
Shareholders approved one or more proposals at many well-known neighborhood names. Among other examples:
- In 2009, 61.2% of CVS Caremark (NYSE: CVS ) shareholders voted for the power to call special meetings, and 59% voted in favor of an advisory vote on executive compensation.
- In 2010, 70.7% of McDonald's (NYSE: MCD ) shareholders and 73.6% of Walgreen (NYSE: WAG ) shareholders voted for adoption of a simple majority vote.
- In 2009, 60.4% of Safeway (NYSE: SWY ) shareholders voted for the power to call special meetings.
- In 2010, 53.1% of Home Depot (NYSE: HD ) shareholders voted in favor of shareholder action by written consent.
Finding tools to see the big picture
In the aftermath of the financial crisis, more investors seem to realize that oft-ignored proxy voting actually represents an important element of being part owner of a public company. Shareholder proposals in annual proxy statements aren't just good reading -- they can also provide excellent indicators of potential future risk.
Investors who want to see whether activists have targeted specific companies can always visit the SEC's EDGAR database online. Interpreting why that data matters is a trickier task, however, which makes searchable databases like Proxy Monitor particularly useful tools for Foolish investors to investigate.
Big-picture investors must weigh the risks associated with certain companies and industries, as well as the potential rewards. Shareholder proposals can reveal companies that need major changes to their businesses or policies, lest they destroy value or damage their own prospects. When it comes to investment risks, forewarned Fools are forearmed.
Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on corporate governance.