In a recent Wall Street Journal article, authors Clark Judge and Richard Torrenzano discuss anticipated changes to U.S. Securities and Exchange Commission (SEC) rules which will allow more stockholder freedom of access to the process of corporate resolutions via the annual proxy.
Is this a new threat to corporate strategy?
Briefly for those of you unfamiliar with this process, annually corporations have their owners (stockholders) vote on various proposals, foremost of which is the selection of the members of the board of directors.
Per the article, these rule changes would allow various stockholders, or groups of stockholders, to nominate individuals for board seats. That nomination process would be at the expense of the corporation and would, again according to the article, create a campaign and election process much like that of any political election we see staged before us every November. It’s forecasted that this process will create more intense debates over various issues before society, offering groups with political agendas such as those of global warming and sustainability, the opportunity to place their candidate of choice on a corporate board. By definition, that candidate of choice would be a candidate who answers to a political constituency, instead of just a constituency of investors, i.e., owners.
A process such as that outlined above would give a clear advantage to activist groups for the placement of their own candidates on a targeted corporate board. This is an advantage which is not currently enjoyed by any activist group. And SEC rule changes such as those proposed above will go a long way to affording more power to activist groups.
But is this just another wrinkle in the everyday ebb and flow of activist vs. corporation? After all, activists and corporations have been wrestling for years. Well, yes, it’s possibly a new wrinkle. But I think this wrinkle is more wrinkly than most that have come before it. Why? Well, the article makes the point that, of course, corporations have always had to deal with multiple stakeholders, stakeholders which activists have traditionally claimed to represent. But the article points out something which is the theme of this blog. That theme is that the current environment in which corporations now need to deal with multiple stakeholders, led by activists, is very different. And one of those factors of difference is social media.
Another recent Wall Street Journal article amplifies this point about social media’s place in the new corporate activism. For example, in this article by Cari Tuna, it is pointed out that a new social networking site, MoxyVote.com, aggregates “advocates” and individual shareholders so that discussions about various proxy initiatives may be made. The effect of which helps activists to present their position to a group of selected shareholders in a socially-supporting environment.
In her article, Cari Tuna also mentions similar sites which allow advocates and individual investors to engage in political conversation regarding proxy initiatives. One such similar site is TransparentDemocracy.org. This site allows
Continue reading "Liberal" Access to the Proxy
Activist and NGO calls upon companies to act in a more transparent fashion are fine, but only up to a point.
Although I am a business advocate, I’m absolutely not in favor of companies adopting questionable processes, cheating consumers, or raping the land. I am a business advocate to the point of business being necessary and beneficial for the larger society.
So when I hear calls for “transparency,” such as is the mantra of many a social media guru, I think that transparency directed at the interested consumer is good, but we can’t take those calls too far. As the adage goes, “Too much of anything is not a good thing.” Why would I say this? Let’s use the following quote as a point of illustration.
In a June 2008 Fast Company article entitled “Buying Local - Isn’t it really about Social and Environmental Responsibility?“, we see the oft-repeated call-to-action under the topic: Questions Conscious Consumers should ask:
Transparency and Accountability: is it possible for me to learn where the materials to make the good came from and who made, transported, distributed, and retails the good? Can I contact anyone of these organizations if I want to learn more?
Before I moved into the area of macro-marketing consulting and analysis of anti-corporate activism, I was a competitive intelligence (CI) analyst. I made my living by examining the strengths and weaknesses of my clients’ competitors. One thing that would have simplified my job as a CI analyst would have been more “transparency.” When I was a CI analyst, had I known: where my clients’ competitors sourced their materials, who transported them, who distributed them, and exactly who retailed them, my analyses would have been absolutely devastating to the competitors my clients were paying me to examine.
With that intelligence, I would have been able to easily zero in on the competitor’s cost profile and from there I would have easily been able to back into the competitor’s profit margin. Easily. Devastatingly. My clients would have been ecstatic. Good for my clients. Not so good for the competitor. That transparent competitor would have “shot themselves in the foot.”
In capitalist markets, and in America we still are a capitalist society at least for the time being, too much transparent information floating around can be bad for the business that releases that info. Excessive transparency can cause reduced competitiveness and with that reduction in competitiveness can go the company itself. “Self-imposed” transparency can cause a company to leave the marketplace, i.e. go out of business, taking the jobs of hundreds or thousands of individuals with it.
And with that company goes competitiveness across the industry. The companies left to compete in that marketplace, companies that are perhaps not as transparent, read that as “stupid,” become fewer, consolidating market power. With consolidation of power comes higher prices and fewer jobs through which the work force can finance those higher prices.
In other words, based upon my experiences as a CI consultant, what I can see as a product of too much corporate
Continue reading Will Too Much Transparency Be Bad for All of Us?
As we watch the media during this current health care debate, we can see that health care reform activists and progressives are driving the debate with a recurring mantra: high-profit health insurance companies are evil. It’s a well-worn, yet still effective tactic, that of activists and NGOs painting the corporate ogre as a greedy, highly-profitable, money-grubbing villain in a drama sure to tantalize. For an example of this type of tactic, let’s take a look at a recent AFL-CIO blog post.
On October 7, 2009, the AFL-CIO Now Blog posted “Health Care Action: Union Activists Visit Congress, Deliver Letters from Consumers.” In the fifth paragraph of this blog post appears this phrase, “insurance companies that put their profits far, far above the people they are supposed to serve.” The AFL-CIO blog perpetuates and exploits the drama to which I referred above and in doing so via this phrase they express two opinions: 1) that health insurance company devotion to its customers is lousy; and, 2) that the insurance companies are overly profitable.
For another example of the tactic of painting a money-grubbing ogre, there is also this passage from The Progressive which in an article titled “Health Care Reform on the Homestretch” dated September 13, 2009 said “Kucinich begins hearings tomorrow in the domestic policy subcommittee entitled ‘Between You and Your Doctor: The Bureaucracy of Private Health Insurance’ with a witness list that includes the family members of patients denied needed care because the industry needs to maintain its high profit margins.” Again, here they are going for the tactic of painting the health insurance industry as money-grubbers with attention to sacrificing customer service in favor of a buck.
Well, I’m not going to tackle the customer service/attention issue. That one can vary company to company, and certainly service at many companies just plain stinks. But I will tackle the assertion by activists, NGOs, and progressives of a health insurance industry that is “highly” profitable. How will I tackle that? I’ll use some facts.
In Fortune Magazine’s list of the Global 500 appears a ranking of the 35 most profitable industries. In looking at the rankings for 2008, we see the following listing for return on revenues:
1. Mining, Crude-Oil Production 19.8%
2. Pharmaceuticals 19.1%
3. Tobacco 12.3%
Now, those are very good profitability numbers. I wouldn’t call them obscenely profitable, but I would call them very good.
But hold on. Where is the health insurance industry? Let’s continue farther down the list.
13. Beverages 4.2%
14. Health Care: Insurance and Managed Care 3.7%
15. Metals 3.7%
There it is. The health care insurance industry’s profitability is ranked #14 out of 35 industries ranked. I wouldn’t call that 3.7% wildly profitable. Even in this relatively stagnant stock market we now experience, the health insurance companies could just exit the market and stick their money in moderately aggressive investments and do at least as well. They could even stick their money in long-term CDs and do much better.
To see
Continue reading Activists Attack The "Highly" Profitable Health Insurance Industry
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