May 29, 2004

EZ Shareholder Activism

An article at Innocents Abroad demonstrates a gaping need for a changeover in how stockholders are empowered to vote. The problem is that corporate governance gets to be too much trouble if you are an index investor or highly diversified with a great many small positions all across the market.

The problem has a solution but only if stockholders get into the current century in the exercise of their voting rights. What is needed is a group of corporate governance improvement organizations that can solicit voting rights from shareholders. Let's say that you think that stock options should be expensed (I'm not taking a position pro or con on this and the example could easily be reversed). If you could assign stock expensing votes on all your holdings in a short amount of time, you would be much more likely to do so rather than going through your entire portfolio, identifying which companies aren't up to snuff and composing a shareholder proposal that you personally present at the yearly shareholder meeting.

Essentially, it's an information technology problem, something that isn't really all that difficult to solve. All that needs happen is for some big wheels to come up with a universal system that anybody with a governance idea can plug into and make all public corporations plug in too.

Posted by TMLutas at May 29, 2004 10:29 PM