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| Best Practices |
Action Figures
Suzanne McGee
08/02/2004
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Not for Dilettantes
Shareholder activism can prove demanding of our time,
energy and resources. Investors need only to have owned $2,000 worth of stock in
the company for one year before filing a shareholder resolution. The real test,
Klinger says, comes when the company challenges the resolution before it
goes on the ballot. “When individuals, however sophisticated they are in their
own business, suddenly get a registered letter telling them that a big firm of
Wall Street lawyers is contesting the proposal, it’s nerve-racking,” he
explains. “That’s when they have to decide whether or not to put their own legal
team on it, and whether they care enough to pay those big bills.” (RW’s staff
undertakes these tasks on behalf of its members.)
Our pet resolution—say, to
force a company to stop buying raw materials from countries with poor
human-rights records—must also pass muster with the Securities and Exchange
Commission. The SEC bars shareholders from trying to amend a corporation’s
charter or pursuing self-interest. It also prohibits resolutions that involve
issues deemed “the responsibility of the corporation. “You have to word the
resolutions very, very carefully,” McGurn warns.
“Deciding you’re going to
be a shareholder activist is not a rational thing for a wealthy individual
shareholder to do,” Monks admits. “You spend the money to get a resolution on
the ballot and spend the time lobbying to get it passed. Then, even if you win,
you only get a fraction of any benefit. That’s a hell of a crummy
deal.”
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