August 18, 2007
Congratulations to the SEC in attempting to placate a variety of self-centered constituencies. But I'm afraid that it's hard to please all of these prima donnas, as no matter what you try and do, there will be plenty of whining. As a 40 year investor in equities, I have accumulated a great amount of wealth that could never have been amassed if I kept my money in the bank. I have only American capitalism to thank for that. I am not a large investor indeed most of my stock has been accumulated through company DRIPS programs. To get to the point, investors should have faith in the management of their investments, and if they don't they should not invest or, if invested, they should sell.
It is a bunch of hooey to think that some silly investors should be able to put their own candidates on the board on the company's dime. There has long been a vehicle for trying this, but it costs money--it's called a proxy fight. Why should it be that some home-style governance "experts" should make a company put their lackey on the company ballot merely because they hold 5% of the stock? Most of these governance "experts" really are not even investing their own money, either. They are people hired by unions or investment funds who are investing money earned by others.
I think that if someone wants to play an active role in the affairs of a company's Board, they should either approach the Board in a non-adversarial manner, and seek to advance their position. If the board is not receptive, the advocate should either decide to put up or shut up. If you don't like what a company is doing, sell and move on to some other investment. Alternatively, if you want to run the company, then by golly put up your own money to lodge a proxy fight. I am not a historian, but would guess that most of these efforts are ignored by rational shareholders. That is why all the hullabaloo over getting the candidate on the company's proxy statement.
I think that if the SEC is forced to come up with some mechanism at all in this arena -- which it should not merely to cow-tow to all of the dissident factions -- it should impose a hurdle of ownership at 35%. If one or more people holding an aggregate of 35% want to nominate a dissident, then, and only then, should the company be forced to pay for such silliness.
Otherwise, I think it best for the SEC to keep it's nose out of this tent. Who knows where this would go once you start talking percentages.
If you like a company, like I have over the years, buy and hold. If you don't, then sell and move on. All this hooey about effecting change from the peanut gallery should stop before we make America even less competitive going forward. If Nero fiddled while Rome burned, we'll be the next example, playing with our governance structures while many of the former "3rd world" countries eclipse us. Let's not become the British Empire of the 21st Century.