I published a story a few days ago regarding the prospect of developing a progressive investor network. The intent of this group was to mobilize 100,000 small or first time investors into a coalition, each buying a single share of common stock in target companies. Since owning a single share confers substantial power in an organization, such a group could coordinate to use the basic rights of investors to fundamentally change wall street and redirect its influence over politics.
Apparently, the Republicans already recognize the danger of such a coalition:
Are Republicans Trying To Eliminate Activist Investors? Bill To Replace Dodd-Frank Could Silence Shareholders
Under current Securities and Exchange Commission rules, investors must own 1 percent or $2,000 worth of a publicly-traded company’s market capitalization for a continuous year. Hensarling’s bill would get rid of the $2,000 standard altogether, mandating that shareholders own 1 percent of the company for three years, according to a committee memo describing the bill. It would also raise the vote percentage needed for investors to resubmit their proposals the following year, and prohibit the filing of proposals on behalf of other investors.
I still believe the “1 share 1 vote” model I previously proposed under current SEC rules has tremendous potential, but this door may be closing. If you have interest, here is the basic model I was describing:
Proposed Name: The BLUE CHIP Investment Network
Premise:
Activist grassroots investors, each buying a single share of common stock in target companies, can use the basic rights of investors to fundamentally change wall street and redirect its influence over politics.
Goal:
Mobilize 100,000 investors, using social media, to leverage corporate management, policies and decision-making.
Objectives:
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Acquire influence in corporate management.
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Reverse the trend in deregulation through internal policy controls.
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Divest corporations from conservative institutes and think tanks
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Guide corporate donations and support to Democratic candidates and social causes.
Proposed Motto:
“Invest in change”
Rally:
“Don’t fight wall street, own it”
Basic Investor Rights:
Ownership of a single share of common stock, gives a shareholder surprising power over a company. There are six basic investor rights:
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Voting Power on Major Issues - This includes electing directors and proposals for fundamental changes affecting the company
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Ownership in a Portion of the Company - Unlike a one time political donation, purchasing a share of stock (sometimes for as little as $10.00) gives the owner ongoing rights to influence the organization as long as the share is owned.
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The Right to Transfer Ownership - shareholders are allowed to trade their stock on an exchange. Because stocks are so liquid, you can move your money into other places almost instantaneously. Working in concert, activist investors can significantly affect share value (if activist investors propose a policy that is not adopted, for example, a mass selloff of that stock could result in significant loss of stock value).
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An Entitlement to Dividends - this may serve as the revenue stream to operate this organization if sharehlders are willing to donate a portion of dividends this initiative.
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Opportunity to Inspect Corporate Books and Records - public companies are required to make their financials public. This power can still be very important for private companies.
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The Right to Sue for Wrongful Acts - stockholders have “Standing” to initiate legal action against a company that engage in “harmful” activities which might include acting contrary to new corporate policies or government regulations.
Other investor rights:
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Corporate Governance - each company has its own corporate governance style. These policies are often crucial in determining how a company treats and informs its shareholders.
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Shareholder Rights Plan - in addition to the standard shareholder rights outlined by the government, shareholder rights plans outline the rights of a shareholder in a specific corporation. In most cases, these plans are designed to give the company's board of directors the power to protect shareholder interests in the event of an attempt by an outsider to acquire the company and it is generally exercised when another person or firm acquires a certain percentage of outstanding shares. The “1 share, 1 voice” model generally should not trigger a company's shareholder rights plan.
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Sometimes There are Little Extras - some companies provide perks like coupons or discounts.
The “1 share, 1 voice” model
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Recent innovative websites and brokers like “Stockpile” make it possible for novice investors to buy a single or fractional share of stock for a very small transaction fee ($0.99). They have also made it possible to “gift” stock like a gift card.
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A single share of a corporation’s stock (which may trade for as little as $10.00) is all that is needed to gain stockholder rights.
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The “1 share, 1 voice” model allows activist investors to use limited funds to buy stock in a range of corporations and influence multiple companies.
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Limited financial risk - “Activist Investors” can resist the siren song of self interest when they are only risking a single share of stock.
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This absolutely should not dissuade the grassroots from donating to political candidates, but unlike a donation, shareholders keep their stock and the influence it grants for as long as they want.
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Wall street understands profit based motivation; it is not prepared to respond to a large organized network of individual activist investors trying to change corporate culture.
Investor activism:
Model corporate policies (these proposals are generally nonbinding until adopted by the company's board of directors but they provide powerful incentives to boards and affect company reputation and media relations). Corporate policies, once enacted, potentially achieve social justice outcomes by bypassing federal legislative gridlock and bottlenecks in state laws
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Living Wage (set a corporate minimum wage)
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Equal pay (eliminate gender inequity in pay)
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Board Diversity Policy (the SEC has already issued a rule that requires companies to include in their proxy statements “more meaningful” diversity disclosures relating to board members and nominees in an effort to provide information that is more meaningful to investors.)
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Quality Health Insurance
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Commitment to Employee privacy (for example: refuse to collect employee genetic information)
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Commitment to Customer privacy (for example: refuse to collect customer internet browsing history)
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Employee Ownership (include common stock shares in the employee pay structure)
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Retirement protection (guarantee solvency of retirement plans by empowering a 3rd party retirement management team.
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Nondiscrimination
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Respect in the workplace (anti-bullying)
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Honest media relations (adopt ethics policy)
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Election day / vacation day (grant all employees the federal election day in November as a paid vacation day)
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Divestment from ALEC and other right wing think tanks
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Develop corporate “Microgrants” program to leverage donations for common good projects
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Develop a corporate commitment to an educated workforce by providing funds to support public higher education.
Examples:
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In 2004, board of directors of Coca-Cola Bottling recommended a vote in favor of reporting on its efforts to respond to the HIV/AIDS pandemic.
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In 2006, 21 out of 75 environmental proposals, resulted in deals with companies, such as Lowe's Companies Inc. and General Motors Corp. to provide reports on environmental impact.
Thresholds:
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Majority ownership is not required to influence policy or management
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Relatively few stockholders vote in most company elections
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Recent changes to U.S. Securities and Exchange Commission (SEC) rules gives greater voice to small investors
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On August 25, 2010, the SEC passed a rule that allows investors and shareholders to nominate board members by placing them on the proxy ballot mailings before they are mailed out. To limit an overflow in nominations, there is a 3% ownership requirement for individuals or groups.
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The SEC states you must hold at least $2,000 in stock, or 1% of the outstanding shares, for a minimum of one year before the company's annual submission deadline before you can introduce a shareholder resolution for a proxy vote. You must also follow specific SEC guidelines when you file a resolution. The resolution cannot exceed 500 words and it must conform to exact procedural and content requirements. Finally, the resolution must be filed by the deadline stated in the company's annual proxy statement - at least 120 days before the statement is released. If your resolution is accepted, you or a representative will be required to participate in the shareholder meeting.
The role of Social Media:
Potential Partners
Social activist groups like Amnesty International already allot part of their budgets to buy stock in companies where they hope to effect policy change. As a shareholder, Amnesty International has pressed companies to make changes to human rights policies and joined other investors to co-file resolutions on an array of issues.
What is the role of the Network?
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Identify businesses that can be influenced
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Draft model policy statements
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Identify and recruit potential board members
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Meet with boards
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Attend mandatory shareholder meetings
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Coordinate voting through social media reminders
How would it operate?
This is not set up to be a “money maker.” The network might request that activist investors donate stock dividends (usually pennies each year for a single share of stock) to operational costs.
Expertise Needed:
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Investment specialists
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Lawyers
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Policy experts
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Social media engineers
I don’t have the expertise, resources or connections to do this myself. But I believe the idea is sound, and someone out there has the right combination of resources and relationships to build something new. I am hoping that together we can make this a reality.