Shareholders Insist on Greater Say

CORPORATE `DEMOCRACY'

HAVING toppled the Berlin Wall, the forces of democracy are now targeting ... Wall Street? ``Even most of the Eastern Bloc countries now have elections that are more democratic than those of America's publicly owned corporations,'' writes Boone Pickens, the Texas oilman who mounted a dozen hostile corporate takeover bids in the 1980s.

``Our corporations run the only elections in America where the incumbents alone decide who will run for office, then send the ballot to the voters, who must sign the ballot and return it to the incumbents, who then count the returns and announce the results,'' he adds.

Meeting in Panama

That's nothing. Panama, the middle of the Everglades, and the wilds of Wyoming are places corporations have held annual meetings to discourage shareholders from even attending. Other firms have scheduled meetings on the fourth of July or over the Christmas holiday, according to ``The Misfortune 500,'' an expos'e of corporate misbehaviour.

And when shareholders showed up anyway to raise unwelcome questions, executives have had gangs of employees shout them down, have cut off their microphones, even had guards throw them out.

Management highhandness may be going the way of the one-party state. At their annual meetings this spring, corporations around the United States can expect shareholders to clamor for rule changes that would give them a bigger say, especially on controversial anti-takeover measures (see sidebar).

Last week's proxy fight at Lockheed Corp. has been the season's biggest shareholder rights battle so far. Counting the votes will take some time, but even if dissidents led by Texas investor Harold Simmons are defeated, management has promised to make concessions.

Fifty other companies are the targets of ``pro-shareholder'' proxy proposals put forward by the United Shareholders Association (USA), a 62,000-member organization founded by Mr. Pickens. He has long crusaded against measures that companies take to prevent hostile takeovers, charging that executives use these tactics to entrench themselves at the top, regardless of how little company stock they own or how the company performs.

``If a football coach goes 0-11 two years in a row, he's history,'' says Ralph Whitworth, USA's director. ``Look at Roger Smith at [General Motors Corporation]. He's gone 0-11 for the last nine years in a row, and you can't get rid of him.'' He says that during the GM chairman's tenure the auto giant's share of the domestic market for cars and trucks has fallen from 43 percent to 35 percent, wiping out 180,000 jobs.

(Yes, a GM spokesman responds, but improvements in the company's overseas businesses caused net income to rise from $333 million in 1981 to $4.2 billion last year.)

Pickens is a newcomer to shareholder activism compared to John and Lewis Gilbert. For half a century the persistent brothers, who own a handful of shares in hundreds of firms, have made the rounds of those annual meetings to push for shareholder rights - an uphill battle.

``Historically, management wins and shareholder proposals lose,'' says Peg O'Hara of the Investor Responsibility Research Center in Washington. The IRRC evaluates shareholder resolutions for stockholding institutions and pensions funds. Ms. O'Hara says institutional investors, which own more than 30 percent of all corporate stock, used to vote automatically with management, if they bothered to vote at all.

Not anymore.

Institutions own 60 percent of Lockheed stock, and many sided with Mr. Simmons. ``The company was underperforming and had for quite a few years,'' says Maryellen Andersen at the State of Connecticut Retirement and Trust Funds, which voted against Lockheed management.

Investor awakening

Big investors have awakened to the fact that anti-takeover measures can dampen a stock's price, hurting the performance of their portfolios. Management rebuffs to shareholder questions have spurred their concerns.

Also, the Department of Labor has been more active in recent years in prompting the funds to vote - and to know why they voted the way they did - as a matter of fiduciary responsibility. The department regulates corporate and labor pension funds and ``pretty much sets standards'' that other institutional stockholders follow, O'Hara says.

``Years ago,'' says Mr. Gilbert, ``we got only 3 percent'' of the votes for resolutions the brothers introduced. ``Now the institutions vote with us, not against us. We get terrific votes,'' topping 50 percent on a resolution at Outboard Marine Corporation's Jan. 18 meeting this year (but falling short of the ``supermajority'' of over 70 percent needed to win).

``We've had many battles with Mr. Pickens, incidentally,'' Gilbert adds. In 1985 Pickens converted his company, Mesa Petroleum, into a master limited partnership, which isn't required to elect a board of directors or hold an annual meeting. The Gilberts had to persuade Pickens to do both.

Then, ``two years ago, the way he conducted the annual meeting was disgraceful,'' Gilbert says. Pickens didn't want to allow discussion of management or shareholder proposals before voting. They objected; Pickens relented. (A Mesa spokesman says Gilbert made some valid points, but that calling the meeting disgraceful ``significantly overstates'' the case.) This year they want a post-meeting report.

``Since he tells everybody else what to do, he should set the example,'' Gilbert says.