Investors Lose Champion in Disbanding Association

Article excerpt

The news is bittersweet: Shareholders have come a long way, but one of the key organizations that helped individual stockholders exercise their rights is about to fold its tent.

The United Shareholders Association (USA), which has battled for improved shareholder rights for the past seven years, will disband at year end, said Ralph Whitworth, the group's president. The group's mission _ to reform shareholder proxy rules and stir national debate on shareholder rights _ has been 90 percent accomplished, Whitworth said.

"We saw ourselves as catalysts. We wanted to set goals, take action, get things done and then move on," said Whitworth. "We could stay around as a watchdog group. But the only method we can use is harassment _ embarrass our targets in the media. And we don't see ourselves nipping at the heels of Corporate America indefinitely. That isn't constructive and it was never our goal."

To be sure, shareholders have won significant victories in the past seven years. However, small shareholders still have a long way to go. And experts believe it may be rough sledding without United Shareholders.

"This is a real blow to us," said Nell Minow, principal of Lens Inc., a Washington, D.C.-based investment company. "Even institutional investors often relied on initiatives sponsored by USA to get their message across. This really leaves a void."

To understand what USA accomplished and what remains to be done requires a bit of explanation.

When United Shareholders was founded in 1986, Wall Street was in the throes of takeover mania. And T. Boone Pickens, USA's founder, was in the thick of the activity, making hostile runs for Gulf Oil, Unocal, Diamond Shamrock and others.

Where some shareholders won by getting premium prices for their stock, company managers often got ousted when takeovers were successful. As a result, some responded to the takeover threat by creating: "Golden parachutes," which pay managers huge sums to quit. Staggered boards, where only a few directors can be ousted each year. "Poison pills," that sabotaged bidders who came in without management's blessing.

Many corporations still employ these tactics.

But the most troubling trend was something called staggered voting rights, which reduced the voting rights of common shareholders and increased the voting power of a handful of company insiders. That was done by creating two classes of stock. But one class had several times the voting power of the other.

United Shareholders commissioned studies that revealed the negative effect of these corporate changes and launched a massive letter-writing campaign that ultimately resulted in an SEC prohibition against exchange offers for stock with different voting rights. …

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