For many years, the financial world just didn't care about shareholders' opinions. If you didn't like your stock's performance or policies, you supposedly had two options: Sell it or shut up about it. Somewhere along the way, everyone seemed to forget that owning shares makes you part owner of a public company. But now, at long last, shareholders are starting to remember that their opinions count.
Like it or ... vote!
Over the last decade or so, shareholder activist John Chevedden has filed hundreds of shareholder proposals at public companies, aiming to improve corporate governance policies. While individual investors should definitely appreciate his efforts, some of the companies in question definitely don't.
This year, San Antonio, Texas-based Kinetic Concepts (NYSE: KCI ) tried to squash Chevedden's shareholder-friendly demands. Kinetic excluded Chevedden's proposal for annual director elections from the company's proxy statement, citing last year's similar skirmish and subsequent court ruling between the activist investor and another Texas-based company, Apache (NYSE: APA ) .
But never fear: Prominent proxy advisory firm Institutional Shareholder Services (ISS) stepped into the fray to save the day. ISS recommended that Kinetic Concepts shareholders withhold their votes for the company's directors: "In this instance, the company has taken upon itself the role that is reserved for the SEC and the courts and in doing so, has denied shareholders an opportunity to vote on an important issue without the force of law."
The potential for an investor revolt apparently prodded Kinetic Concepts into doing what it should have done in the first place. The company announced that it will amend its bylaws to allow for annual elections of directors. (For more inside dirt on this major win for shareholders, read James McRitchie's post on corpgov.net and Houston Chronicle reporter Loren Steffy's piece.)
Votes matter
Kinetic Concepts isn't the only company ruing the day it disappointed its shareholders. Now that say-on-pay votes are mandatory, reports of shareholders rejecting outrageous CEO pay keep rolling in. Although the number of companies with rejected compensation plans remains in the minority, the pay plans that do get shot down show that shareholders are finally starting to speak their minds.
Most recently, shareholders have basically said "enough is enough" to compensation policies at Talbots (NYSE: TLB ) , Nutrisystem (Nasdaq: NTRI ) , and Masco (NYSE: MAS ) . These embarrassing defeats should remind more companies to rethink their policies with shareholders in mind, lest they face a future boardroom backlash from irate investors
Shareholders aren't confining their complaints to compensation, either. A group of investors including the AFL-CIO, the trustee of New York's largest pension fund, and Trillium Asset Management recently urged Chevron (NYSE: CVX ) to settle litigation related to alleged environmental damage in Ecuador.
Corporations won't improve on their own
Sure, executives and boards need to remember that shareholders matter -- but so do many investors themselves. If your company's pursuing dubious tactics to muzzle your fellow investors, engaging in poor practices, or paying its top executives more than their performance actually merits, don't suffer in silence, or surrender and sell out. Vote your proxy ballots, call your company's investor relations department, and raise as much ruckus as you can.
As long as you own a piece of a public company, you ought to be ready and willing to fight for it.
Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on environmental, social, and governance issues.
RSS Headlines
Fool UK