- Increase the number of stockholders that can aggregate their shares to make a proxy access Board nomination from 20 to 50 stockholders,
- Eliminate a requirement to count individual funds within a mutual fund family as separate shareholders for purposes of satisfying the minimum ownership requirements to make a proxy access nomination, and
- Eliminate a requirement that a previously nominated proxy access nominee achieve a specified level of shareholder approval in order to be eligible for re-nomination.
Tag Archives | gadflies
Gadfly proposal on your corporate proxy? One implicit conclusion from a recent academic study is that you should short the company as soon as the SEC disapproves the company’s no-action request, since a proposal from a gadfly is likely to reduce the company’s value. Even though their intent is primarily to show why managers generally oppose proposals, that is the takeaway investment strategy one might conclude from a paper by John G. Matsusaka, Oguzhan Ozbas and Irene Yi entitled Why Do Managers Fight Shareholder Proposals? Evidence from No-Action Letter Decisions. (Why Do Managers Fight Shareholder Proposals, pdf)
Investors Skeptical of Gadfly Proposals
Researchers found a statistical correlation between Securities and Exchange Committee (SEC) staff decisions to block a no-action request and negative abnormal returns over the period of 2007-2016, “suggesting that investors agree with managers that these proposals are value-destroying.” “[O]ur main finding is that the market responded positively to the granting of a no-action letter.” “Investors are not particularly skeptical of proposals by unions and public pensions, but appear to view proposals by individual ‘gadfly’ shareholders as value-destroying.” Continue Reading →
Gadflies at the Gate: Why Do Individual Investors Sponsor Shareholder Resolutions? is the catchy title of a new paper (8/2006) by David F. Larcker and Brian Tayan. Its part of the Stanford Closer Look Series from the Corporate Governance Research Initiative. While I am happy to see a more objective view the role retail shareholder advocates play in corporate governance than the nonsense presented by Steven Davidoff Solomon, I’m not sure what Gadflies at the Gate really adds by raising questions without advancing answers. I suppose, like many academic papers, it is pointing out the need for further research, like a cobbler calling for more shoes. I advise further reading that is more action oriented.
Gadflies at the Gate: Possible Misrepresentations
Most people don’t like their behavior criticized. CEOs and boards almost always fight my proxy proposals aimed at improving corporate governance. Likewise, I wasn’t happy with the Deal Professor’s criticisms of my shareowner activism in his August 19th NYTimes article, Grappling With the Cost of Corporate Gadflies, which also criticizes John Chevedden and William Steiner. I stewed for days but finally took the advice of a good friend, who is Assistant General Counsel & Corporate Secretary at a major company,
Better to be engaged than enraged!
If I had more time available, my response would have been shorter but I have a number of projects that demand attention. When I submit proposals, I want boards to weigh them carefully on the merits. I have tried to do that with the Deal Professor’s criticism. I hope our mutual use of hyperbole doesn’t preclude further engagement. Unlike the character in the cartoon at right, I feel no need to irritate… but I do often question mechanisms in corporate governance that isolate and concentrate power, rather than distributing it. I prefer structures that distribute power, making us of the wisdom found at all levels. Continue Reading →