ballot wars: a response to dan walters re prop 226<>
From: James McRitchie jm@corpgov.net
Subject: Sacramento Bee, "Ballot War"
Date: Sat, 11 Oct 1997
In response to your column of 10/10/97, I wouldn't be so quick to dismiss the analogy between shareholders and union members. Both have the same option if they don't like where their money is going. They can either sell/quit or they can work within their corporation/union for change.
You say stockholders can sell their shares if they disagree with company policy. Mr. Walters you are living in the past. Your statement may be true for 1/2% of the population who own most of the stock held by individuals. Most of us, however, have the vast majority of our investments with institutions such as retirement funds, mutual funds and insurance companies.
According to the Conference Board, institutional investors increased their share of ownership in the top 1,000 corporations from 46.6% in 1987 to 58.8% in 1996. So, for example, Fidelity manages 2.6% of the total market, the College Retirement Equity Fund manages 0.7% and CalPERS 0.4%. I can't be expected to sell my Fidelity funds if they invest in companies who contribute to a candidate I don't want to support and it would be even more difficult to "sell" my retirement fund.
My other option would be to try to influence how my money is being spent. Unions are about as democratic as government elections. I can select between competing candidates or run myself. I can work for specific policies to be adopted. Influencing our unions isn't always easy; it may take a great deal of effort but it can be done.
My influence in corporate elections is much more indirect. First I would have to convince the board of Fidelity or CalPERS to take the position I advocate. Assuming I'm successful, the prospects of these powerful institutional investors holding sway would still be slim. First they would have to meet the conditions of SEC Rule 14a-8 for proxy submissions. Requiring a shareholder vote for campaign contributions would probably be thrown out under the "ordinary business" exclusion.
For the sake of argument, let's say such a proposal is accepted. Corporate elections aren't democratic. Robert Monks found that out when he ran for the board of Sears. He spent $500,000 to try to win 1 seat but they spent more than $5 million of shareholder's money to defeat him. Only a tiny minority of corporations have confidential voting. If I could get CalPERS to sponsor such a resolution and I got Fidelity to vote for it, the corporation would probably come back to Fidelity after they voted and ask them to change their vote. They would remind Fidelity how much they would loose if the corporation no longer offered Fidelity funds as an option to its employees in their deferred compensation program.
If the Wilson backed measure is successful, don't be surprised if the next initiative requires all corporations doing business in California to obtain the specific permission of shareholders before spending money on political campaigns. If such a measure wins, it won't have nearly the same impact on corporations, since corporate elections aren't very democratic, but I'm sure it would still have a substantial impact. In fact, if by drawing attention to corporate elections, it simply made corporations more accountable to their shareholders, such an initiative may be well worth the effort.
James McRitchie
Elect Jim McRitchie to the CalPERS Board
I want to know your concerns and I value your advise. Contact: Jim McRitchie at jm@perswatch.net or telephone 916-691-9722. Visit the "McRitchie for CalPERS campaign" on the internet at http://www.perswatch.net/
From: James McRitchie jm@corpgov.net
Subject: Sacramento Bee, "Ballot War"
Date: Sat, 11 Oct 1997
In response to your column of 10/10/97, I wouldn't be so quick to dismiss the analogy between shareholders and union members. Both have the same option if they don't like where their money is going. They can either sell/quit or they can work within their corporation/union for change.
You say stockholders can sell their shares if they disagree with company policy. Mr. Walters you are living in the past. Your statement may be true for 1/2% of the population who own most of the stock held by individuals. Most of us, however, have the vast majority of our investments with institutions such as retirement funds, mutual funds and insurance companies.
According to the Conference Board, institutional investors increased their share of ownership in the top 1,000 corporations from 46.6% in 1987 to 58.8% in 1996. So, for example, Fidelity manages 2.6% of the total market, the College Retirement Equity Fund manages 0.7% and CalPERS 0.4%. I can't be expected to sell my Fidelity funds if they invest in companies who contribute to a candidate I don't want to support and it would be even more difficult to "sell" my retirement fund.
My other option would be to try to influence how my money is being spent. Unions are about as democratic as government elections. I can select between competing candidates or run myself. I can work for specific policies to be adopted. Influencing our unions isn't always easy; it may take a great deal of effort but it can be done.
My influence in corporate elections is much more indirect. First I would have to convince the board of Fidelity or CalPERS to take the position I advocate. Assuming I'm successful, the prospects of these powerful institutional investors holding sway would still be slim. First they would have to meet the conditions of SEC Rule 14a-8 for proxy submissions. Requiring a shareholder vote for campaign contributions would probably be thrown out under the "ordinary business" exclusion.
For the sake of argument, let's say such a proposal is accepted. Corporate elections aren't democratic. Robert Monks found that out when he ran for the board of Sears. He spent $500,000 to try to win 1 seat but they spent more than $5 million of shareholder's money to defeat him. Only a tiny minority of corporations have confidential voting. If I could get CalPERS to sponsor such a resolution and I got Fidelity to vote for it, the corporation would probably come back to Fidelity after they voted and ask them to change their vote. They would remind Fidelity how much they would loose if the corporation no longer offered Fidelity funds as an option to its employees in their deferred compensation program.
If the Wilson backed measure is successful, don't be surprised if the next initiative requires all corporations doing business in California to obtain the specific permission of shareholders before spending money on political campaigns. If such a measure wins, it won't have nearly the same impact on corporations, since corporate elections aren't very democratic, but I'm sure it would still have a substantial impact. In fact, if by drawing attention to corporate elections, it simply made corporations more accountable to their shareholders, such an initiative may be well worth the effort.
James McRitchie
Elect Jim McRitchie to the CalPERS Board
I want to know your concerns and I value your advise. Contact: Jim McRitchie at jm@perswatch.net or telephone 916-691-9722. Visit the "McRitchie for CalPERS campaign" on the internet at http://www.perswatch.net/