The old saw "it's the economic system, stupid" is a conflict cry among shareholders that may become the subject anthem of the 2008 proxy season. Shareholders faced with disappointing returns are, of course of study, more probably to become activists than the happy investors of good times. Take, for illustration, the reorganization at electrical circuit City shop Inc., one of many retail merchant hurt by the consumer spending diminution. The Wall Street Journal reported that a Colorado-based investment fund launched a proxy fight to remove the company's board and elect five directors to boost the company's turnaround prospects and hopefully increase its stock price. The fund holds only a small stake (6.5 percentage) in the company.
As more and more companies post losses, management shake-ups in firms representing all industry sectors will grab newspaper headline -- including those where investors perceive maltreatment in executive director compensation. According to Mercer, management determination relating to executive director compensation will be top of mind for shareholders in financially deteriorating companies this proxy season. Mercer study that many companies have late made or are presently planning major accommodation to their concern model and realigning compensation consequently -- a daunting process compounded by confusion over SEC revelation requirements.
pickings such proactive steps to avoid stockholder proxy resolutions represents a administration sea alteration. Academic survey of the past have shown that even when a proxy declaration wins a bulk of the vote, most companies tend to ignore them. But a recent Harvard concern School stockholder resolution study shows that in 2003-2004, companies adopted more than 40 percentage of proposals that obtained a bulk shareholder vote. According to the study, proposals to stop anti-takeover measures and confidential shareholder vote were most probably to be adopted.
Shareholder advocacy groups are recommending that managements hold on to their hats -- it's going to be a bumpy ride as the 2008 proxy season progresses.