VideoThis year is already a high-water mark for shareholder activism. Boosted by corporate scandals as well as increasing involvement by labor unions, consumer groups, and other organizations, the number of shareholder resolutions that have received majority support in 2003 has already surpassed the number for all of 2002, according to a report by Institutional Shareholder Services.
A total of 139 resolutions have received majority support as of August 5, compared with last year's total of 106. And the number-one subject of shareholder resolutions might not be what you'd think.
More than 40 shareholder resolutions targeting executive pay have received majority support in 2003, compared with only 3 in 2002. Another 30 resolutions calling for the expensing of stock options — a resolution allowed onto proxy ballots by the Securities and Exchange Commission for the first time this year — have received majority support. In previous years, companies were allowed to exclude such resolutions from their proxy materials using the SEC's "ordinary business" exception.
Poison pills, however, are the top shareholder target; 53 resolutions addressing them have received majority support so far in 2003 — an all-time high. Last year, 44 such resolutions received majority support. Of the 2003 poison pill resolutions, several have received majority support for years but have not been adopted by the companies in question, including those at Delphi, Raytheon, and Southwest Airlines. The SEC is considering a recommendation from its division of corporation finance that could classify ignored, majority-supported resolutions as "trigger events" that would allow shareholders to place their own board nominees onto company proxy materials, according to the report.
This year also marks the first with more than 1,000 proposals submitted by shareholders, an increase of about 25 percent compared with last year.
Return of the Armchair Employee?
One lesson from the blackout of 2003, argues John Girard, a vice president at Gartner research, is that companies should let more of their employees telecommute.
Girard, who lives in Connecticut, noted that he was fortunate to be working from home on Thursday afternoon — and not only because he didn't have to join "people and cars competing for space on the bridges, trying to get back to their homes outside city," as he wrote in a posting on the Gartner web site.
Because he was working from home, Girard was able to continue working without interruption. "I had two brownouts," he recalled, "but those did not disrupt my laptop, which simply switched to batteries." DSL broadband and cable stayed up because they were on an uninterruptible power source that can be found at stores for $100, he said. And even if those failed, users could "default to their dialup modem," since conventional telephones kept working throughout the blackout.
"Even if I had lost power I had enough laptop standby battery for three hours' work on a dialup connection, and I have a laptop airline adaptor that can work with my boat battery for 12 hours," said Girard. "I also keep two old-fashioned line-powered phone sets in the house for such occasions, which cost about $9 each."
Girard's modest proposal (not dissimilar to suggestions made about two years ago) is this: Companies should start rethinking their entire approach to the corporate headquarters. While watching the misadventures of the Thursday-evening commute, he questioned "how many of these people really needed to be in a downtown office to be doing their jobs on a dog day anyway."
"If they work in cubicles and use their phones to call their clients, it's just crazy," he said. Employers could save money, he added, by rotating workers through a part-time telecommuting program and "hoteling" those workers who were required to appear at the office on a given day. What's more, he concluded, "The city might have been restarted more quickly if all those air conditioners and lights had not been on."
Deflating That Deflation Talk
Despite recent warnings by Federal Reserve chairman Alan Greenspan, talk of any serious bout of deflation may be exaggerated, according to a recent report by Moody's Investors Service.
According to Moody's, a pickup in global economic activity may mean higher prices going forward, at least as far as commodities and "intermediate materials" are concerned. "A livelier pace of global economic activity suggests that the annual core rates of inflation for both crude and intermediate materials are likely to climb up from their July readings of 3.9 percent and 1.8 percent respectively," said the report.
Some prices have already risen steeply, according to the report. The cost of natural gas to businesses was approximately 38 percent higher in July than a year earlier; electric utilities paid nearly 58 percent more for natural gas; jet fuel costs were 11.3 percent higher; and diesel fuel prices advanced by 19.5 percent.
In addition to a pickup of economic activity, "sharply higher natural gas and energy prices get some of the blame for the steep price advances of certain chemicals and plastics," noted Moody's. The report added that July's 8.6 percent yearly price gain for industrial chemicals and 9.3 percent rise for plastic resins practically corroborated the presence of a rising world economy. A number of building-material prices also recorded steep annual advances in July, including gains of 7.6 percent each for hardwood lumber and plywood, 26.2 percent for building paper and board, and 5.2 percent for gypsum.
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