For all of corporate history, the idea that shareholders would be able to manage large enterprises has been laughable. The entire point of corporations is to take the day to day management of the enterprise away from people who frankly don't care about the details but merely want a return with people (directors) who are paid to pay very close attention to those details and appoint further management to deal with even smaller levels of detail.
But what happens when the interests of corporate directors and shareholders start to no longer be in sync? The classic response has always been general shareholders meetings where shareholders simply toss the offending official out of the board or pass a shareholder resolution binding the directors to a particular course of action. Thus shareholders are the ultimate power in any corporation but because they don't usually care about much beyond return on investment and they have little time to manage the affairs of the company it generally takes an earthquake in bad management before they get involved.
But with the information revolution, it doesn't have to be that way. With the explosion of stock discussion groups and other forums, it's become clear that a significant number of shareholders are more than willing to express their interests more than in the past and they also have to pay a tiny fraction of the prior cost to bring their proposals to the attention of other shareholders so that they would have a chance of being voted in despite a management recommendation that the measure fail.
But is this a solution in search of a problem? The answer can be found in books such as The Suicidal Corporation which documents the many ways that managers and directors fend off protestors and boycotters by paying them off, funding people who wish to destroy their industry or capitalism itself. Timber companies funding anti-logging activists, businesses of all stripes pay off professional boycotters, it's all very convenient for the managers but the shareholders' long term interests are sacrificed because the bigger picture is outside of managers' performance metrics.
This is an opportunity for a future business that is a blend of technology and advocacy. There are three separate markets. First there are individual companies who have sufficient activist shareholders and/or management teams with enough foresight to see how this will be, in the long term, useful. A second market is mutual funds who would offer their investors access to the underlying stocks the fund holds and vote its shares as the shareholders who want to exercise oversight see fit. The third market for this type of service is on the very commentary boards that inspired the idea.
All three markets would be served well if the voting software were interoperable with the shareholders in the other two markets. This would prevent unclear expressions of shareholder intent.
Posted by TMLutas at January 6, 2004 09:54 AM