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| Best Practices |
Action Figures
Suzanne McGee
08/02/2004
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Challenging Times
The corporate and regulatory climate today is uniquely
receptive to shareholder activists. The business scandals of the past three
years have made corporations truly averse to bad publicity and criticism of
corporate governance practices. Whether we feel the companies in which we invest
need to tighten up their accounting practices or increase the independence of
their boards of directors, we are likely to find many allies. Shareholder
resolutions are gaining more support than ever at annual meetings. Last year, a
record 172 of the 1,100 shareholder resolutions voted upon at corporate annual
meetings were passed, according to Patrick McGurn, senior vice president and
special counsel for ISS in Rockville, Md. “That’s a high-water mark,” he adds.
While these were virtually all nonbinding resolutions (meaning management may
ignore them), a growing number of corporations are adhering to these resolutions
in order to avoid bad publicity and shareholder dissent.
In this atmosphere,
attempts to challenge entrenched management at large corporations (once a
near-impossible task) are beginning to succeed. The recent campaign to unseat
Michael Eisner as chairman and CEO at Walt Disney is one example. Roy Disney,
the founder’s nephew and a former board member who became unhappy with the
company’s strategic direction and lagging share price, challenged Eisner and, at
the company’s March 3 annual meeting, he and his allies won the support of
investors holding 43.5 percent of Disney’s stock. While the directors reaffirmed
their support for Eisner after the meeting, he did step down as chairman; former
U.S. Senator George Mitchell, an independent board member, took his place.
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