No Shareholders Allowed

Boards have turned a deaf ear to shareholder proposals. Listen up.

Everyone hates to be ignored, especially shareholders. But according to a recent finding by the Investor Responsibility Research Center, they should be used to it.

The data showed that between 1998 and the first quarter of 2000, only 15 percent of the nonbinding shareholder proposals approved by a majority vote in surveyed companies were fully or partially enacted by the company’s board of directors.

Particularly susceptible to the “we’re not listening” treatment were any proposals that sought to “declassify” the board, thus making all board members stand for reelection at the same time, instead of on a staggered schedule. Such a change can make hostile takeovers easier. Companies that chose not to act on shareholders’ desires include Bristol-Myers Squibb Co. and Eastman Kodak Co., both of which declined to act on two separate annual shareholder votes on the matter.

“This isn’t really anything new,” says a spokesperson for the National Investor Relations Institute. “The companies that are best at corporate governance follow the guidelines set by the shareholders. And I think most companies are changing. One by one, they will move toward better corporate-governance policies.”

The traditionally adversarial relationship between boards and investors has caused boards to turn a deaf ear to shareholder proposals, according to Roger Raber, president and CEO of the National Association of Corporate Directors. “You still have boards that look at investors and say, ‘What do they want now?’” says Raber. “You certainly see less of that when a company has lots of institutional shareholders. And more companies are creating a proactive relationship with their investors.”

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