Wading through corporate proxy statements can be a jarring task. Strategic overviews, executive biographies and justifications for compensation are all purposefully snooze-inducing.
But then one gets to shareholder proposals by corporate gadflies. These are often completely loony. And they are usually swatted down. But while they’re good for a chuckle, their fate holds a lesson.
Here’s a sample. Activists wanted JPMorgan to consider rescinding its apology for a predecessor bank’s involvement with slavery.
Others wanted cigarette maker Altria to inform children of their legal rights concerning second-hand smoke, and to exit the tobacco business altogether. And some wanted Wal-Mart to investigate the costs of frivolous litigation.
These sorts of proposals rarely capture more than a handful of votes. But due to investor apathy, trust in management and big investors’ desire not to tick off companies they do business with, even reasonable proposals rarely win. Take Exxon Mobil. Its shareholders put several issues to vote at its meeting on 29 May. Among them were proposals to allow 10% of the company’s shareholders to call an extraordinary general meeting, to give the company the right to recall executive bonuses and to give investors a non-binding vote on executive pay. Some of these, particularly the latter, actually seem prudent—indeed, some are now being adopted as best practice in corporate governance. Yet, all were voted down.
So, business groups worried that the Securities and Exchange Commission’s current roundtable discussions about shareholder voting rights can breathe easy. Their fear that giving investors bigger soapboxes will result in the capture of corporate boards by special interests looks overblown. Such concerns about the perils of “shareholder democracy” echo those expressed in the 1940s, when investors first got the right to put their proposals on corporate ballots. As one executive said at the time, “This would put dangerous weapons in the hands of the professional troublemaker.” Companies had little to fear then—and now.