| BUSINESSWEEK ONLINE : JANUARY 24, 2000 ISSUE | ||||||||
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| SPECIAL REPORT -- CORPORATE GOVERNANCE
Now, a Gadfly Can Bite 24 Hours a Day As if the occasional gadfly at the annual shareholders' meeting was not enough of a nuisance, CEOs will soon have to tangle with a potentially more powerful form of shareholder activism: organized cybercampaigns. Ever since the rise of the Net, chat rooms and message boards have overflowed with anonymous criticism of boards. But the level of discourse and the power of some participants are rising. ''The Web will change the face of activism in the future,'' predicts Patrick S. McGurn, of Institutional Shareholder Services Inc., a proxy advisory firm. ''It promises to increase activism and to perhaps radicalize smaller investors.'' EASY ACCESS. Already, the powerful California Public Employees' Retirement System (CalPERS) and the Domini Social Equity Fund broadcast their planned votes on proxy issues over the Web. Activist investors, from Greenway Partners LP to Lens Inc., now use the Net to prod underperforming managers and boards. And the AFL-CIO's pension funds attempt to stir up debate on CEO pay by using the Web to publicize the issue at the top 500 public companies. For shareholder activists and gadflies, the Web makes it easier and cheaper to contact and organize other investors. ''Think about the cost of doing a mailing to all of a company's shareholders,'' says Damon A. Silvers, associate general counsel of the AFL-CIO. ''On a Web site, you can gain access to everybody.'' What's more, CalPERS has found that if you put it up on a Web site, people will indeed come. When the fund began posting its votes on proxy issues last spring, the site received more than 30,000 hits per month. The goal is to post votes two weeks prior to an annual meeting so that shareholders can follow its lead. ''We're seeking to influence people's opinions on issues,'' says Kayla J. Gillan, general counsel of CalPERS. By clicking on the pension fund Web site, for example, investors can find that it plans to withhold votes in January alone for the election of some directors at Tyson Foods (TSN), Emerson Electric (EMR), and Micron Technology (MU). The reason: Some board members have business or personal relationships with the company or top management that CalPERS believes can compromise their independence. This spring, the fund will broadcast its votes on 300 companies, up from 100 last year. The most ambitious effort to use the Web as a tool to champion change will debut over the next few weeks with the appearance of eRaider.com. The idea, hatched by two business school professors, is to create a place where investors can organize to target what they call ''sleepy, selfish, or unfocused'' managers and boards. Discussions will be led by experts in accounting, finance, and governance. The site will pack an extra wallop because the organizers are putting together a mutual fund to buy into underperformers and hector them to improve. ''We'll organize interest on the Net among investors,'' says Aaron Brown, eRaider co-founder and a finance professor at Yeshiva University. ''Oversight by 50 or 60 people communicating on message boards is better than one overworked stock analyst.'' The Web, thinks Brown, can be used to transform small investors, who routinely side with management, into active shareholders. ''There are lazy and incompetent boards out there, but there also are boards that have no idea what shareholders want,'' says Brown. ''The Web will allow investors to say how their companies should be managed.'' It's enough to make a CEO sentimental about the good old days when gadflies were little more than an annual annoyance. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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