When 43 percent of stockholders withheld their votes Wednesday in
Michael Eisner's uncontested bid to remain at the helm of Walt
Disney Co., they sent a no-confidence message that will resound in
boardrooms far beyond the one that runs Mickey's realm.
Shareholders - especially big institutional ones who manage other
people's money - are mad. And with the new proxy season now under
way, they appear set to act on their anger, experts say.
"You'll see this in other companies," says Charles Elson,
director of the John L. Weinberg Center for Corporate Governance at
the University of Delaware. "The day of easy shareholder approval of
a company that's had governance and performance issues is really
over, and I think boards need to be mindful of that."
Signs of the latent power of shareholders can be seen in
leadership changes that came in advance of the season of shareholder
meetings, which roughly runs from March through May.
Philip Watts, head of Royal Dutch Shell, resigned Wednesday.
Shareholders have been simmering since January about Shell's
downward revising of its stated oil and gas reserves. Last month's
announcment by Douglas Daft, Coca-Cola's chief, that he would retire
at year's end came amid federal scrutiny following charges by former
executives that the company overshipped ingredients to bottlers to
pump up financial results. Four years ago, a shareholder lawsuit
reportedly made similar charges.
After the Disney vote, the company's board met a key demand of
the protesters by stripping Mr. Eisner of his chairman's position,
but handed it to his close ally, George Mitchell. Eisner remains
Disney's chief executive officer.
While shareholder revolts almost never win majority support, they
can attract enough attention to change corporate behavior. "It's a
blunt instrument to send a message," says Gerald Davis, professor of
organizational behavior at the University of Michigan. But "I think
we're seeing the fruition of some long-term trends."
A confluence of events from corporate scandals and mismanagement
to rule changes is pushing mutual funds, insurance companies, and
pension funds to take a more activist approach in voting their
shares. Experts call it a new era of accountability.
"I think there's no question that what's happened over the past
three years or so has shortened the fuse for institutions," says
Beth Young, a lawyer and research associate at The Corporate
Library, an independent online source of corporate governance
information. "There used to be a sentiment that you give people a
fair amount of latitude, you give CEOs and boards a lot of time....
There's a sense now that that attitude really allowed mismanagement
and corruption and wrongdoing to flourish."
Professor Davis points to developments over the past 15 years or
so that he says have made it much easier for institutional investors
- and small ones, voting their proxies - to wield real influence
over the way boards do their work. …