How to exercise your shareholder power

  • Anyone who's owned $2,000 of a company's stock for a year can introduce a resolution.
  • Read the proxy and ask questions about the directors, compensation and auditing.
  • If shareholders can attend the annual meeting, they should do so and ask questions.

Remember the old movie "Network"? That's the one where the anchorman Howard Beale, faced with the loss of his job and the collapse of life as he's known it, throws open his apartment window and bellows: "I'm mad as hell and I'm not going to take this anymore!" Soon he has millions of Americans chanting along with him.

If you're holding a tanking stock (and who isn't these days?), the daily business headlines may make you feel like joining that angry rant. Eight-figure CEO paychecks! Million-dollar office renovations! Fat management bonuses that reward failure! Whose company is it, anyway?

It's yours, of course. And this is the time of year when you can flex your ownership muscles. Spring is corporate annual meeting season, when the loftiest CEOs stand humbly before their shareholders and face the music. It's your chance to let management know what you think of the job it is doing and exert some influence over where the company is going.

As a shareholder, you can vote for or against members of the board of directors and say yea or nay on major decisions affecting the company, such as mergers or liquidation. If you've owned $2,000 in the company's stock for at least a year, you can submit a resolution on just anything from executive compensation to environmental policies, and put it to a vote of your fellow shareholders.

Granted, you may not have management shaking in its shoes. Even the biggest investors can't always budge a headstrong CEO, as T. Boone Pickens and Carl Icahn learned when they tried to convince Yahoo to accept Microsoft's buyout offer last year. But as activists like Evelyn Y. Davis demonstrate yearly, someone with a mere handful of shares can command attention.

This sidesteps the ongoing debate -- partly ideological, partly practical -- over how much shareholders actually should get involved, and on what matters. Ira M. Millstein, a prominent Wall Street lawyer and long-time advocate of shareholder rights, has written and spoken extensively on this issue. He believes investors can and should be vocal about how the company is run. Moreover, he argues that they have "legitimate interests" in how the company behaves in such areas as climate change, sustainability, labor relations and political contributions.


However, Millstein, who heads the Millstein Center for Corporate Governance and Performance at the Yale School of Management, warns that at some point shareholder involvement can hamstring the board and management. In an article he recently co-wrote with two legal colleagues, he points out that "the fundamental role of shareholders in corporate governance is to assure that the board of directors is composed of persons capable of 'managing and directing' in the best interests of company and its shareholders."

Get involved

If you decide to roll up your sleeves and get involved, how do you begin? Typically, by poring over the proxy statement the company mails every shareholder several weeks before the annual meeting. "Many shareholders simply toss their proxies in a file or, worse, the trash," says John E. Deysher, president and portfolio manager of the Pinnacle Value Fund, a diversified SEC-registered mutual fund. "But with it, they are throwing away their votes -- and their shareholder right to keep management's interest in line with their own."

The proxy statement -- in some cases it's actually a packet containing several documents -- describes when and where the annual meeting is to be held. It also contains a detailed outline, in Q&A form, of the proposals that are to be voted on. This includes the election of directors, the approval of other corporate action and solicitations by other shareholders.

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