Can We Curb Obscene Pay? 5 Examples of Shareholder Activism
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A so-called Shareholder Spring has spread throughout Europe and the U.S. in recent months. Flexing new power given to them by last year’s Dodd-Frank reform law, shareholder-activists have turned traditionally boring shareholder meetings into actions where they demand change from the corporations that have done shareholders – and citizens in general – wrong over the past several years.
The UK has seen the most dramatic results of these actions, with three CEOs (at publisher Trinity Mirror, insurer Aviva and pharmaceutical company AstraZeneca) resigning amid shareholders’ outrage over CEO pay. The movement has also caught on in France, where newly elected president François Hollande is planning to slash the paychecks of several CEOs. (In France, the government owns a large stake in many companies, so the nation is a shareholder.)
The U.S. has seen a flurry of actions, resulting in votes against increasing CEO pay, at least one severely truncated shareholder meeting, and predictably, arrests. Although the actions have not all directly resulted in changes within the targeted corporations (though some have), the overall movement has been a success in that it has helped shareholders find their voice. The Occupy movement sparked the national conversation about corporate greed, and now shareholder-activists are taking some of those messages and ideas off the streets and into the corporate spaces where shareholder meetings take place.
The movement has resurrected a form of activism that got its start in the 1970s but had been underutilized in recent years until the passage of Dodd-Frank, which gave shareholders a “say on pay.” That say is nonbinding, so corporations can choose to ignore shareholder votes. But a majority “no” vote against some outrageous CEO pay-out matters for a corporation’s public image.
Dodd-Frank also required corporations to calculate and publish their pay ratio – the amount a CEO makes relative to that of an average worker. (In the U.S. today, the average CEO makes 325 times what the average worker makes.) The SEC has not yet enforced that rule, and as Leo Gerard wrote in a piece pi AlterNet recently, it’s clear that CEOs do not want that information to get out – it would just put more wind in shareholder-activists’ sails.
So how exactly are these actions going down? They all look different, but the message is the same: hold corporations accountable. Below are several noteworthy examples, chosen from many, of ways the Shareholder Spring is taking off in the U.S.
1. Walmart dumps ALEC. There was big news last week in the grassroots anti-ALEC campaign: Walmart, the largest retailer in the world, joined some two dozen other major organizations in ending its affiliation with the right-wing front group behind “stand your ground” and voter ID laws, among other dubious legislation. Even with so many other major corporations dropping ALEC, it didn’t seem likely that Walmart would follow suit. But it did, amid -- what else? -- shareholder protests urging the company to disclose the money it spends on campaigns and lobbying.
2. A 'no' vote for increasing executive pay at Citigroup. We may not have seen CEO resignations like our UK counterparts, but there have been several major “no” votes to increase executive pay here in the U.S., most notably at Citigroup, where last month shareholders voted against an increase in the compensation package for the bank’s executives. Since “say on pay” is nonbinding, Citigroup could ignore the vote, but it is not expected to do so due to the PR nightmare that would result from such a move. Across the pond, similar votes were passed recently at Swiss financial services company UBS and British bank Barclays.
3. Pushing ExxonMobil to adopt LGBTQ-inclusive policies. ExxonMobil’s shareholders recently voted on a resolution that would have dragged the company out of the stone ages by enacting an LGBTQ-inclusive policy. As AlterNet reported, the measure was introduced by New York Comptroller Thomas DiNapoli, who believes in “the fundamental principle that when corporations behave in ways that benefit society, they also help their bottom line.” Unfortunately, the vote failed, but it got many shareholders fired up, and they will undoubtedly come back next time with more power. (ExxonMobil has also been targeted recently for excessive executive pay and denying worker safety measures, so there are plenty of battles to fight.)
4. EQT temporarily shuts down meeting amid angry shareholders. Natural gas company EQT had to adjourn its annual shareholder meeting for more than an hour when angry shareholder-activists began yelling about executive compensation and other issues. The Pittsburgh Post-Gazette reported that a “shareholder asked if the board of directors supported the Buffett Rule," while others got in a heated argument about “the ethics of its board of directors and a proposal to shorten director tenures to one year.” Meanwhile, anti-drilling activists gathered outside.
5. Activists disrupt shareholder meetings. In addition to shareholder-activists taking a stand at annual meetings as of late, activist-activists, many of them from the 99% Spring movement, have also been showing up at shareholder meetings to protest corporate greed. At the GE shareholder meeting, several thousand 99% Spring activists marched outside Detroit’s Renaissance Center to protest unfair pension and living allowance measures.
Carnival’s shareholder meeting in Miami was similarly disrupted by activists speaking out against the company’s tax-dodging ways.
This year’s Bank of America shareholder meeting was a big one for activism, with thousands of activists and a number of arrests made outside the bank’s Charlotte, North Carolina headquarters. Things heated up inside the meeting room as well, with one shareholder reportedly calling Bank of America “a felon.” Afterward, Mitt Romney was forced to comment on the protests (when he surely would have preferred to ignore them).
And at oil refinery Tesoro’s annual meeting, protests led the company’s CEO to end the meeting after just 12 minutes, without even taking shareholder questions.
Even the editors of Bloomberg, not exactly a hotbed of anti-capitalist sentiment, agree that the Shareholder Spring has been important and necessary. “You could more easily argue that shareholders have been too patient for too long than that their recent complaints are groundless,” they wrote in a recent editorial.
Now the question is: will these corporations listen?