Changes Give Boost to Investor Activism
If you are a shareholder of a publicly held corporation _ and most Americans are _ you have the opportunity to participate in one of the most sweeping investor trends in decades: shareholder activism.
And now as millions of Americans get company proxies for the 1993 spring and summer annual meeting season, seasoned shareholder activists say you'd be wise to jump on the bandwagon. Done right, activism can be profitable.
More people are expected to participate this year than ever before, too, because securities regulators changed the rules late last year, making it easier and less costly for shareholders to band together and complain to management _ the simplest form of shareholder activism.
Until last October there were two types of communication "in the world" that required government review before mailing _ information about nuclear secrets and communication among more than 10 shareholders, says Nell Minow, principal of Lens Inc., a Washington, D.C., investment company. Now shareholders can communicate with one another without first sending their letters to the Securities and Exchange Commission. (If you're divulging nuclear secrets, you still need to get government approval.)
That simple change has opened up activism to the masses. That's good for shareholders because communication between management and owners can only help company performance, Minow maintains.
"I think companies perform badly often because they have surrounded themselves with nodders," she said. "You need somebody with a little bit of an outside perspective to come in and question your assumptions. That's what this is all about _ making sure the right questions get asked."
What does activism mean to shareholders? Added profits, experts say.
Two recent surveys, commissioned by the California Public Employees Retirement System, found that investors who capitalize on shareholder activism can expect to earn substantially better returns than what you'd expect from a "passive equity investment."
The added return ranges from 4.5 percent at companies where shareholder initiatives have been quietly and privately negotiated to about 15 percent at companies that have been overt targets of shareholder attention, according to The Gordon Group, a Massachusetts firm that conducted the most recent comprehensive study.
"Activism definitely has an impact," said Richard H. …