CORPORATIONS Shareholders gain in proxy voting

Shareholders' votes show anger with management.
LOS ANGELES TIMES
For four straight years, lumber giant Weyerhaeuser Co. has faced an annual shareholder vote on a proposal that all company directors be re-elected yearly instead of serving staggered three-year terms.
The argument for annual re-election is that it would improve the board's accountability to shareholders.
For the past two years, Weyerhaeuser investors appear to have spoken loud and clear: The proposal got 55.9 percent of the votes cast at the 2002 annual meeting. At this year's meeting, held April 15, the ayes jumped to 63.8 percent.
Weyerhaeuser management's response after the 2002 vote was to study the issue and then reject it. With the most recent vote, the board will "take it under advisement again," said Bruce Amundson, director of financial relations.
Weyerhaeuser illustrates both the ecstasy and the agony shared by activist investors during this annual-meeting season. As they seek to reform corporate behavior, activists finally are winning over many other shareholders who for years had loyally backed management. By most accounts, the success rate of shareholder proposals on company proxy ballots this year has been extraordinary.
Yet in the world of proxy voting, winning a majority can bring self-satisfaction for dissident shareholders, but it's no guarantee of genuine change. That's because their resolutions almost invariably must be advisory, not binding, on a company's board or its managers.
Crowing
Even so, many activists -- especially labor union pension funds -- are crowing about their victories this spring. They point not only to the majority votes their resolutions are getting at annual meetings, but also to the growing list of companies that are voluntarily implementing suggested governance reforms on issues including executive pay, stock-option expensing, board structure and general accountability to investors.
Patrick McGurn, senior vice president of investor-rights group Institutional Shareholder Services in Rockville, Md., said he counts 71 majority votes for shareholder resolutions so far this proxy season, most of them against major companies.
He expects the final tally to top 150, which would be "50 percent more than we've ever seen before," he said.
"These are big numbers," said Charles Elson, director of the Center for Corporate Governance at the University of Delaware. "They show that people are very angry, and mistrustful of management."