More resolutions, withheld votes

With corporate annual meeting season moving into full swing, investor unrest is coming to a head.

A record number of shareholder resolutions have been lodged, with a new emphasis on directors deemed to have committed various sins.

Shareholder activism has burgeoned in recent years, particularly after the downfall of Enron Corp. and its brethren made corporate malfeasance part of the national discourse.

Much of the response has come through shareholder resolutions, typically advisory votes that have managed to prompt change on social and corporate governance issues.

This year, institutional investors also are stressing the usually symbolic withheld votes from directors--a single vote almost always elects them, after all--but now withheld votes could have serious implications.

That's because under a plan awaiting a vote by federal regulators, a withheld total of 35 percent of the votes at a company would allow investors to nominate candidates to run in contested elections at the next annual meeting.

The movement was energized last month when investors banded together to withhold 43 percent of the vote from Walt Disney Co. Chief Executive Officer Michael Eisner, prompting the board to oust him as chairman.

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[CLB: Does this sort of brute-force change change the results in a significant way? Yes and no. Yes, investors have found a way to evoke a coordinated change in the governance of companies. No, investors may become a "banana republic dictator" as any other dominant voting group. Will the pendulem simply swing away from profit (rather harmfully), and too far towards social responsibility? The problem is the continuum they're still on. It's not long term sustainable either.