Gretchen Morgenson is one of the most aggressive advocates of shareholder voting rights proposals. Criticism of the proposals to increase shareholder proxy access only seems to strengthen her resolve. One source of this strength appears to be her spectacular immunity to argument and evidence.
One would think that advocates of a massive, centralized, bureaucracy driven overhaul of the proxy access rules would want to build their arguments on a foundation of improving the shareholder value. After all, investors don’t buy shares of public companies in order to exercise metaphysical governance rights or realize some Platonic form of ownership. They buy shares to invest, to make money. That’s why we call them investors.
And, in fact, many advocates of the new proxy access reforms do claim that there proposals would somehow enrich shareholders. (We think they’re lying, mistaken or misled, but no reason to go into that now.) But not Gret-Gret. She frankly acknowledges that corporate governance is producing amazing returns for shareholders.
“Given that this year’s stock market performance has been so stellar, most investors are probably pretty content. It is not as if shareholders have their torches in hand and are ready to storm the nation’s boardrooms,” she writes.
It's hard for us lowly editors of DealBreaker to think like a New York Times columnist. But we're pretty sure Gret-Gret thinks that this strengthens the case for increased proxy access. Because most shareholders are content, the changes “would probably not result in a mass ouster of directors,” she writes. This may be the first time in history generalized contentment has been cited as bolstering the case revolutionary change.
Of course, except in the Business section of the New York Times, most people paying attention to this issue understand that the case against the proxy access proposal doesn’t rest of a nonsense fear of the overthrow of the directors of the means of production. It rests, instead, on a respect for federalism, insights into public ignorance, the ability of dissatisfied shareholders to sell their shares and a rational fear of special interest exploitation. But to read Gret-Gret, you’d think these objections have never been raised.
But if it’s not mismanagement that’s driving Gret-Gret, what is? It seems to be a desire to achieve some sort of cosmic justice. Or, as she puts it, to ‘do the right thing.”
“Ownership usually brings certain rights, after all,” she writes. And Gret-Gret—and, of course, the employee dominated pension funds—know exactly what those ‘certain rights’ should be.
As long as we’re sticking the knife in, might as well give it a twist. Larry Ribstein points out that whatever the New York Times editors might think of shareholder democracy, the owners of the New York Times have a very, very different view.
The Owners Who Can’t Hire or Fire [New York Times]
The NYT and shareholder rights [Ideoblog]
Posted by , Oct 22, 2007 4:32PM
how is this an issue again? we want to be able to do what now? oust board members more easily?
Posted by , Oct 22, 2007 5:56PM
third paragraph, top line, third from the right..."their" you can get rid of "that" too
Posted by Josh , Oct 22, 2007 6:53PM
And thus continues the attack of the capitaly-communists. Her intentions are crystal clear, as the WSJ had pointed out a long time ago. The pension fund stash emasculated communists was to utilize the concept of 'ownership' to push their choicest social schemes through public companies. 'Shareholder wealth maximization' is most definitely not the intention (and you have to give it to them, they are pretty openly blatant about it too.)
So there you have the Democratic agenda - unfettered unionization, forced participation in unions with no accountability of the union bosses to anyone (todays WSJ ed, they cut regulators overseeing union fraud), pushing public companies towards non profitable 'social' ventures, free food, drinks, clothes, healthcare (cars?) and wealth redistribution.
And then you mention the word 'communist' and they deny it! Why the shame, why not just accept it?
Posted by Reader, I Married Myron Scholes , Oct 22, 2007 7:05PM
"This may be the first time in history generalized contentment has been cited as bolstering the case revolutionary change."
Amending corporate board election rules and end-of-game decision procedures is hardly what I'd call a revolution! Despite the childish nickname applied by Mr. Carney, Gret-Gret has some grown-up reasons for opining the way she does. And (for those who want to be persuaded) so does Harvard Law Professor Lucian Bebchuk--the Liberty Leading the People, if you will.
One of Carney's arguments--that if I'm dissatisfied with governance procedures, I can simply sell my shares--is weak weak weak. Let's say I own shares in a stellar company called Orange that I think will dominate its indsustry for the next ten years, and I bought in at the current 52-week low. Even if I strongly believe that bad corporate governance is costing me 2% ROI every year I own Orange stock, it still might not make sense for me to sell the shares in protest, since they are so great and selling would burden me with taxes. Telling me just to sell my shares in Orange over corporate governance is kind of like telling me to leave the U.S. because I disagree with its drug sentencing laws. Though I disagree with both corporate governance and drug sentencing laws, it is not in my best interest to sell great stock or leave a great country over issues that are small in the overall scheme. Instead I (like Morgenson, Bebchuk, et al.) will hope to change the rules!
(For a quite enjoyable discussion of these issues, I encourage readers to listen to a recent University of Chicago Law School podcast by Prof. Todd Anderson...who is in the non-Morgenson camp, by the way.)
Posted by Josh , Oct 22, 2007 8:34PM
"Amending corporate board election rules and end-of-game decision procedures is hardly what I'd call a revolution!"
What matters is not how incremental the changes are but the overall motives behind such moves. The backers of this change are primarily the labor-union and the 'social responsibility' group. Their primary aim is NOT enhancing shareholder return but controlling the resources of public companies (through large pension fund pools) to implement schemes of the kind that are being pushed through the broader government. Even a cursory glance at the political backers of this move lay bare all the scheming behind the move (and hence the support of the NYT editorial board.) Their argument is simple - pension funds do not have as strict limits on common stock ownership as do other investors, and the successes they tout are not of increasing returns but of forcing companies to divest from certain regimes, regions and to change hiring/recruitment practices etc. How is that directly related to ROI (whether 2% or 200%)?
And let me use a counter argument, if everything is going great then why do we exactly need change? Why the crazy activism for implementing 'issues that are small in the overall scheme'? And why, to cover for a subjective '2% ROI loss' would someone implement rules that would open the door to potentially 50% future destruction in ROI through non-price maximizing actions?
Aren't the multiple references to 'ownership' self explanatory? The socialists are demanding 'ownership' with the aim of effecting changes to operations of public companies to further their social agenda.
Anytime unions come together to push something through strongly (especially when it doesn't concern them directly AT ALL) something ought to be wrong. After all, who can forget the 'Free Union Choice' agenda where abolishing secret ballots is supposed to lead to free-er exercise of 'choice' (in socialist world I guess).
The proponents are constantly refer to 'long term value'. So when tomorrow when a private consortium makes an offer , let us say 30% above the current price, to take the company private - these people want even greater say on being able to reject these claims (as you can imagine) under the guise of hypothetical 'greater long term value'. The true motives will be political - to protect unproductive jobs and to make a political statement against the purchased (most likely capitalists).
And you argument is seriously weak. First, if you are dissatisfied with corporate governance procedures - you have the freedom to NOT buy shares in the first place. The very fact that you purchase in a free market means that you see better potential here AND you agree to the charter of shareholder rights that was pre-existent. It is like voluntarily immigrating into a country with certain laws and then claiming the laws are not fair. You always have an option of not immigrating in the first place!!
Posted by Xman , Oct 23, 2007 10:03AM
Why are conservatives always so angry? They see everything as a conspiracy by unions, the "liberal media", etc. What gives? You've got the White House, Senate, Supreme Court and enough of the House to put any meaningful breaks on the Bush agenda.
Posted by , Oct 23, 2007 10:31AM
Weren't liberals the ones hurling bricks into banana republic and h&m showrooms doen here in DC this weekend?