Report: Shareholder activists abuse Dodd-Frank regs

Matthew Boyle Investigative Reporter
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report released Wednesday morning shows political activists, labor unions and social policy groups appear to be hijacking the corporate governance processes of some Fortune 150 companies.

Report author James Copland, the director of the Manhattan Institute’s center for legal policy, told The Daily Caller that while both left-wing and right-wing political interests have taken advantage of new Dodd–Frank regulations, liberals have done so far more.

“Clearly on the social policy proposals, they skew to the left,” Copland said of the comparative levels of shareholder activism across the political spectrum. “The social investing funds are often out there pushing environmental causes, human rights causes, animal rights causes — People for the Ethical Treatment of Animals and others — but they’re not universally on the left.”

“You have the Free Enterprise Action fund, for instance, filing proposals on companies that it thinks are being too left-wing,” Copland adds.

From 2008 to 2011, individual shareholder activists, labor union pension funds and social policy groups filed 98 percent of all shareholder proposals filed with Fortune 150 companies. No social policy proposals have passed, but that doesn’t stop activists from trying.

In most cases, too, Copland says “say on pay” regulations — the Dodd–Frank rules that allow shareholders to vote on executive compensation — haven’t been effective for activists who push to cut corporate management salaries. Copland explained that because most shareholders of the largest Fortune 150 companies are not activists, those driven by political agendas aren’t yet as successful as they would like to be.

But new regulations add to an ongoing corporate governance trend that sees executives’ hands tied with procedural regulations to a greater and greater degree.

Copland said special interests exerting newly acquired power to influence corporate procedures likely have a negative effect on the economy, and on job creation.

“Well, it certainly doesn’t help,” Copland told TheDC. “And there’s lots of regulations that don’t help. At a minimum, [they] are taking management’s eye off the ball. It’s forcing management to address these types of issues” even when shareholder proposals fail.

“They have to spend time and money. The board of directors and the top level management, they have very scarce time. What you want them to be thinking about is ‘how can we invest, how can we grow our business and how can we ultimately hire more people who are making more money?’”

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Matthew Boyle