Is Shareholder Spring a Myth?

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Is Shareholder Spring a Myth?We’ve heard a lot about “Shareholder Spring” this year – the idea that this proxy season shareholders were actively standing up and forcing changes in the boardroom. Some of this is attributed to Dodd-Frank and a mandatory say-on-pay vote (one that is nonbinding, but more about that later). Actually, it seems as if we hear a lot every proxy season about surprising vote tallies or outspoken shareholders and their impact. One or two stories make the rounds and we’re told progress is being made – corporations are being held to account by the shareholders. But is that really true? With all the proxy advice, say-on-pay, shareholder actions, etc., what is the real effect?

We were told, by The New York Times, that the number of shareholder proposals went up 3% this year.  Is that alone a success? Let’s look at the outcomes of these proposals, so far. Ernst & Young, in Proxy Season 2012, Early Voting Results, report that “Early vote results from the 2012 proxy season reveal that” increased disclosure and communications efforts by corporations, “are helping to secure strong support amid investor pressure.” Still, E&Y tells us that there was little support for votes opposing board member re/election – only 3.8% of these votes got more than 20% support. And support for pay packages has been strong despite the one or two instances played up for good media stories. Pay votes, so far, averaged 91% of votes. One article in The Guardian last month seemed to have a more reasonable view of shareholder success,  “Investor revolts have claimed some scalps, but radical reforms to how companies are managed and directors paid is years off.”

That sentence says it all: any real change is still years away.  Active owners and fiduciaries in the trenches keep chipping away at this issue year after year and I am thankful for their tenacity. But let’s be realistic about any gains and certainly about any successes brought on by Dodd-Frank. Say-on-pay has had no effect on salaries, there were no real fights over board appointments and my never-ending effort for an independent board chairman at Exxon is still a work in progress.

It’s Kabuki theater. But it always boils down to the same results. Each year we read stories about amazing confrontations with corporate America but whatever the story, the results rarely vary from year to year.

Did we have a shareholder spring? I don’t think so. Do you?