Originally posted by UofCinLA
I'll bite -
Each company you mentioned is traded publicly - you too can be the owner so quit whining, buy some stock and join them. Vote out evil board members
and all that crap.
Are you kidding? Do you know how Wall Street works?
Pension funds (the firms that manage large pools of public or corporate pension funds monies from individual investors), mutual fund companies and
wealthy large investors are the only ones that can hold any sway over corporate boards--and it is a rare occasion that there is ever any type of major
shareholder action, especially these days. The buy-side--the large investor--is a sheep. They hold all the power, yet they don't want to rock the
boat and see their investment go south. The institutional investor is either a co-conspirator to the fraud or powerless to do anything about it.
And do you know where activism gets any buy-side executive?
Calpers replaces activist president
By Associated Press | December 2, 2004
SACRAMENTO -- Sean Harrigan, a longtime union official and one of the nation's most outspoken advocates for corporate governance reform, was ousted
yesterday from his post as president of the $177 billion California Public Employees Retirement System.
In a 3-2 vote in San Francisco, the California State Personnel Board pulled Harrigan from his Calpers post after five years as the board's
representative to the pension fund. It replaced him with Ron Alvarado, whose background is more aligned with the private business and government
A new appointee of Republican Governor Arnold Schwarzenegger provided one of the votes to replace Harrigan.
In a statement, Harrigan said he was "saddened" to end his involvement in "restoring much needed integrity and accountability to our capital
markets." His supporters alleged that corporate pressure and Republican lobbying, including some from the governor, helped drive the move.
State Treasurer Phil Angelides, a Harrigan ally on the Calpers board, criticized Schwarzenegger and the personnel board for siding with "corporate
interests and against taxpayers, pension fund members, and ordinary American investors."
As president of CALPERS, Harrigan sued the NYSE specialists, which caused the CALPERS fund (and everyone else that trades a listed stock) to lose 15
to 75 basis points on every trade--that adds up to millions of dollars a year taken out of the pockets of public employees in California (and billions
of dollars for everyone.)
Harrigan also led CALPERS to force tighter auditing and financial reporting standards, and worked to enforce independent boards (ie: reduce management
representation on corporate boards) for the companies that they invested in by withholding votes for board members that were uncooperative--even
Warren Buffet. CALPERS was even involved in getting GlaxoSmithkline to lower the price of AIDS drugs and funded projects to bring jobs to
These are very good things for investors--not just the public employees that have their pensions in the California Public Employees Retirement System.
Of course, they are at odds with corporations and management. He rocked the boat and exposed the little games that corporations play to cook their
books and manufacture non-existent profits. He also didn't want complacent or ineffective boards to continue to stay in power.
Fire the bastard!
But there were those who felt that he was just being manipulative--which he must have been because why else would any investment professional want a
pharmacuetical company to lower the price of an AIDS drug, cutting into profits? Would it have anything to do with the AIDS epidemic in San Francisco
and saving lives of people who worked at CALPERS--no! He must be a tree-hugging liberal operative!
Oddly enough, there are some who feel that "corporate social responsibility" (CSR)--is irresponsible, using the reasoning that sometimes chosing the
path that better benefits society forgoes profits--like not investing in tobacco or liquor companies, or firms that pollute the environment, or in
countries that abuse their citizens or are at war with the U.S.
There is much evidence that shows that CSR is very profitable--and vital to long-term investment performance success, yet organizations such as the
American Enterprise Institute (a conservative think tank), Arthur Laffer (Ronald Reagan's supply-side economist), and Steven Milloy from FoxNews have
all made bizarre and unfounded claims about socially responsible investing--which have been taken very seriously by the Bush administration, all
stemming from the notion that investors are missing out on profits because firms that adhere to CSR are using an irrational, non-quantitative
Using this logic, drug dealing and money laundering are also extremely lucrative industries as well. Is there really a difference in investing in a
massively profitable company that cooks thier books, employs 7 years olds in sweatshops, or sells crack to teenagers? They are all maximizing
investor returns--should it really matter what they are doing to society?
Conservatives argue that it shouldn't--and institutional investors have a fiduciary responsibility to invest even in firms that are socially
And they are pursuing legislation to enforce such a thing. Arnold Schwarzeneggar was even attempting to disband CALPERS entirely (defeated,
fortunately) and let public employees manage their own 401k money. I'm sure that bus drivers and fireman could earn a better return than seasoned
investment professionals, right?
Harrigan was only fighting for what's best for the investors he had a fiduciary responsibility to represent--but the corporations fought back. A
massive smear campaign ensued and not only was he fired, but there was an industry-wide backlash from Republicans and corporations that centered
around the argument--how DARE investors tell us how to run our businesses?
The resulting proposals have ranged from large investors essentially being stripped of their full voting rights, stacking the boards of pension funds
with government/corporation friendly stooges, discouraging submission of shareholder proposals to corporate boards with high fees, and authorizing
legal action when shareholders intrude on management of the company.
This is relevent because if a pension fund that owns a large percentage of a company has no control--and the government is willing to remove the
owenership privilege--what power do you think a little shareholder has?
In most cases, retail investors can't even ask questions at shareholders meetings--and that is if you can attend at all.
It is clear that the intention is to allow corporations to have virtually unlimited power--almost always at the expense of the individual. Sure,
corporations employ us, but does that give them the right to misrepresent profits or consistently underperform. Or even worse--dump cancer-causing
chemicals in our drinking water, gouge us with high prices for drugs that we need to stay alive, or get off the hook for any harm they cause us?
It seems that government is thinking in this direction. Although the Enron, WorldCom, HealthSouth and other scandals have hurt our economy (Enron took
$300 billion out of investors pockets alone), it seems that lip service is being paid to improving financial reporting standards. Also, the
corporations' liability is shrinking--and individual legal recourse is becoming more limited, restictions on environmental pollution are being
relaxed and prescription prices are just getting higher (my prescription co-pay is now $50!.)
So why is corporate bad-behavior being rewarded instead of reprimanded? And why are individual rights being sacrificed at the expense of the
corporation? When government is suggesting that we strip owners of publicly-held corporations of their ability to act, it is a clear sign that the
U.S. is headed straight towards fascism.