Some have argued that Ralph Nader started socially responsible shareholder activism with Campaign GM, when the group filed shareholder proposals to expand GM’s board to include consumer advocates and empower shareholders to place their board nominees on GM’s proxy ballot (proxy access). According to a recent article in the WSJ, the longtime consumer advocate is now putting together a shareholder-activism group. (Ralph Nader Adds Shareholder Activist to His Portfolio, 1/15/2014)
As part of that effort, the 79-year-old has pledged 1% of his financial net worth, or roughly $50,000, in each of the next three years if a group of 15 to 20 others will join him to raise a total of about $10 million. He proposes to create a group he calls the Penny Brigade—shareholders would pledge one penny per share of stock they own—to raise an army of 500 people who would push companies to increase their dividends, rein in executive compensation and give shareholders a greater say in other governance decisions.
In 1965, Nader wrote Unsafe at Any Speed, in which he claimed that many cars, including GM’s Corvair, were unsafe to operate. In early March 1966, several media outlets reported that GM had tried to discredit Nader, hiring private detectives to tap his phones and investigate his past, and hiring prostitutes to trap him in compromising situations. Nader sued the company for invasion of privacy and settled the case for $425,000, which he used to start the Center for Study of Responsive Law.
Nader went on to establish dozens of nonprofits fighting for many good causes, mostly around consumer and environmental protection, and to run for president four times. He grabbed headlines recently when he came out against Liberty Media Corp.’s takeover bid for Sirius XM Holdings Inc., saying the bid was far too low. His idea for the group apparently was born after he successfully pushed Cisco Systems to boost its dividend in 2012. (I wish Nader had taken an interest in my 2013 proposal at Cisco to run a proxy advisor contest; we could have used his 18,000 votes and his influence on other shareowners.)
The possible move by Nader to create a Penny Brigade is fantastic, with plenty of potential to mobilize the masses, but not if Nader places his emphasis on working primarily with the top 1%, as implied by his book Only the Super-Rich Can Save Us!. Sure, reach out to Carl Ichan and others to fund the effort, but also try organizing those who file the most proxy resolutions: John Chevedden, Ken Steiner, Gerald Armstrong, and me; public pensions like the New York State Common Retirement Fund, New York City Retirement Systems, CalPERS, CalSTRS; unions like the Carpenters, AFL-CIO; SRI funds and foundations like Walden Assets, Domini, Calvert, the Nathan Cummings Foundation and the Interfaith Center on Corporate Responsibility.
I’d like to sign up, if I can exclude a few penny stocks from my count. There’s a big difference in 1 cent per share of BRK-A at $170,000+ per share and 1 cent per share of MJNA at 20 cents per share. I’d also like to know something more about how the organization would be run before I write a check. I like his idea but I’m frugal, like my friend John Chevedden. (See Special Report: Economy-class activist investor crashes the corporate party)
Nader has such nationwide admiration and following that he could easily set up a network of “field agents,” volunteers willing to present proxy proposals at nearby company meetings. Lots of shareowners are willing to file proxy access proposals, majority vote requirements, split CEO and chair, and other proposals to make companies more democratic and responsive but it is too expensive for us to travel to present our proposals. I can usually find someone in New York, but not Omaha or Birmingham. Nader could set up a network that covers almost the entire country.
This Penny Brigade could also start a legal defense group like Harvard Law’s Shareholder Rights Project. Even if the Brigade goes with the idea of hiring a “full-time watchdog for each of the top five hundred corporations in the country,” they are going to need a legal defense. Some of us are already drowning in expensive time consuming SLAPP suits because we dare to file shareholder proposals. I had a Texas judge as much as tell me he didn’t think I should have the right to influence a company through a shareholder proposal, despite what SEC rules provide. With his legal skills and connections, I’m sure Nader could put a stop to corporations tempted to intimidate shareowners in the courts, rather than using the much simpler, less expensive “no-action” process at the SEC. (See Proxy censorship – or the SLAPP suit and Chipotle Mexican Grill, Inc v. Chevedden, et al for two examples)
Perhaps going a bit further afield, a Brigade could help set up chapters on every large university campus of students to learn about corporate governance, how to file proposals and elect directors. The now defunct United States Proxy Exchange could provide a beginning template for such activities. Working with organizations like 350.org, they might be able to get endowments to divest from coal companies.
Working with organizations like Trillium Asset Management LLC and the Sustainability Group, they could file resolutions to get more women on corporate boards. These organizations recently got Apple to include the following bylaws amendment in its upcoming proxy (Apple pledges to consider adding more women, minorities to board, LATimes):
The nominating committee is committed to actively seeking out highly qualified women and individuals from minority groups to include in the pool from which board nominees are chosen.
I’ve got a proxy access proposal, also to be voted at Apple, that would allow groups of shareowners to place nominees on Apple’s proxy. It is worded to move such challenges from contests of control to coalition governance.
If he plays his cards right, Nader could have even more influence on corporate governance than he has had in consumer protection. Wouldn’t that be a great next stage career for someone turning 80 next month? As Robert Monks and Nell Minow once wrote (Power & Accountability):
Corporations determine far more than any other institution the air we breathe, the quality of the water we drink, even where we live. Yet they are not accountable to anyone.
Corporate elections have the trappings of democracy but the actual mechanisms tilt very much in favor of entrenched boards and managers who too often think of corporations as their own personal piggy-banks, rather than as institutions accountable to shareowners, employees, consumers and the general public. Blank votes on proxies go to incumbent boards. Headings on proxy proposals are changed to gibberish on ballots. Only board approved candidates appear on the corporate proxy. Shareowners can’t split their votes between incumbents and challengers unless they attend the annual meeting in person.
Take Action: Ralph Nader and the Penny Brigade could organize the grassroots and tip the balance of power and accountability. Read Nader’s post at Penny Brigade and then join the penny-brigade or for more information send an email to email@example.com. If you are as excited as I am, cc me in your email, so that I can keep track of those interested… just in case the Penny Brigade falls flat or doesn’t facilitate communication between members. Together, we can fight entrenched managers and boards by making corporate governance more democratic.