Votermedia Finance Blog

July 19, 2009

I Represent Individual Investors

Filed under: Uncategorized — Tags: — Mark Latham @ 7:16 pm

The letter from SEC Chairman Mary Schapiro appointing me to their Investor Advisory Committee (SECIAC) specifies that I “have agreed as a member of the Committee to represent individual investors, particularly with respect to their role in corporate governance.” I am pleased to have this mandate, which I no doubt share with some other Committee members, although I haven’t seen a list of their mandates yet. Each member brings a different background and expertise to the group, a diversity that should greatly benefit our work. I hope our biases balance out well enough to serve the public interest.

I am also pleased to see some thoughtful public comment on this important issue of the Committee’s composition. The first comment in particular stands out for me:

June 3, 2009

Ms. Shapiro,

I write today with the due respect toward your intentions:

U.S. SEC SAYS CREATING INVESTOR ADVISORY COMMITTEE “TO GIVE INVESTORS A GREATER VOICE” IN AGENCY’S WORK Wednesday, June 03, 2009 10:14:03 AM (GMT-07:00)

NEW SEC ADVISORY COMMITTEE MEMBERS INCLUDE REPRESENTATIVES OF AFL-CIO, COUNCIL OF INSTITUTIONAL INVESTORS, CHARLES SCHWAB, BARCLAYS Wednesday, June 03, 2009 10:15:48 AM (GMT-07:00) Provided by: Reuters News

But, as an individual investor, I do not feel these institutions are advocates for me. Like most Americans, I am not a union member, and the interests of the other three would seem to be those of the securities industry, which are often at odds with the interests and protection of the individual investor.

Would you please consider adding to the Investor Advisory Committee at least one true, strong advocate for the individual investor? Thank you.

Sincerely,
Brian Harris

I hope Mr. Harris has now seen the complete list of SECIAC members, and is somewhat reassured by the inclusion of several people who can be expected to advocate for individual investors. Another commenter (Dan Calabria, July 14, 2009) mentions two of them but is still understandably concerned about whether that will be a strong enough voice:

… with the exception of Ms. Barbara Roper (Consumer Federation of America) and Dallas Salisbury (Employee Benefit Research Council), which of the remaining 13 committee members could conceivably be described as anything remotely resembling an investor advocate?

So let me try to add some reassurance about my own loyalty to individual investor interests. A first glance at my résumé might raise some concerns, especially the part about derivatives arbitrage. Isn’t that synonymous with evil? 😉 But the plus side is that I know something about it.

If you look deeper into my publications though, you’ll find this quote in “The Internet Will Drive Corporate Monitoring”:

Using the internet for shareowner proxy voting will not just save money.  It will awaken
the sleeping giant of corporate governance — individual investors.  It will give
shareowners unprecedented influence over the policies of large corporations, by making
“corporate monitoring” possible.  Rational voter apathy will be counteracted by the
internet’s ability to make information exchange cheap and easy.  Likely benefits include
higher profits, support for social goals, and more realistic levels of CEO pay.

Since publishing that article in 2000, I have advocated steadily for corporate governance reforms that will empower investors, especially individual investors. (Also voters in democracies, but that’s a broader story.) You can browse my other publications for evidence of this, especially “Proxy Voting Brand Competition”. I have submitted many shareowner proposals to corporations, pushing for such reforms, which have been consistently opposed by management and voted down by institutional investors. I had those posted at votermedia.org until the recent beta release of our Global Voter Media Platform, and will repost them soon. [2009-07-21: Some are now posted at votermedia.org/proposals; will post more there soon.]

Another specific example of advocacy for individual investors is my activity as a member of the International Corporate Governance Network, whose members are mainly but not exclusively institutional investors. I promoted my reform proposals to its members from 1999 to 2007. Here’s an email I sent to the ICGN Chairman:

From: Mark Latham
Sent: Tuesday, August 26, 2003 10:23 AM
To: Alastair Ross Goobey
Cc: Peter Dey; Pierre-Henri Leroy; Christine Mallin; Nell Minow; Robert A. G. Monks; Ariyoshi Okumura; Taiji Okusu; Raj Thamotheram; Caroline Phillips; Sheila Doyle
Subject: What ICGN has been missing

Dear Mr. Goobey:

Thank you for raising the question (in the July 2003 ICGN business meeting) of what issues or ideas the ICGN may be missing.  I spoke from the floor in response, and am writing now to make sure my suggestions are conveniently available for reference.

I would like to make two suggestions:

1. Amend the recently circulated ICGN meeting minutes’ item #7 by changing:
“Action institutional investors can take to help individual investors.”
to become
“Action institutional investors can take to help individual investors vote their shares.”
(I think this would be a more descriptive summary of what I said.)

2. Consider this issue for inclusion in the program of ICGN’s 2004 annual conference:

Now that internet voting has been implemented for most USA companies, shareowners can break the board of directors’ monopoly on providing convenient guidance to individuals on how to vote their shares.  We can do this by building a website giving individuals such options as “Vote all my stock the same way CalPERS votes its stock.”  One of the many potential benefits would be to reduce the amount of individual stockholdings voted by brokers.

A detailed exposition of this idea is in my paper “Vote Your Stock” on the web at http://www.corpmon.com/publications.htm

I hope you will forward this suggestion to the 2004 conference program committee.  Several active ICGN members know about my work on this topic, and could perhaps help decide whether it merits inclusion.  They are cc’d on this email: Peter Dey, Pierre-Henri Leroy, Christine Mallin, Nell Minow, Robert A. G. Monks, Ariyoshi Okumura, Taiji Okusu and Raj Thamotheram.

Also for your reference on my background, my resume is on the web at http://www.corpmon.com/MLresume.htm

Thanks again for considering these suggestions.

Sincerely,
Mark Latham

I never saw this issue on any ICGN conference program since then, until I stopped renewing my membership in 2007. But this reform is now finally starting to happen, thanks mainly to a nonprofit organization called ProxyDemocracy, founded by Harvard PhD student Andy Eggers, who heard me present the idea at the 2003 International Anti-Corruption Conference organized by Transparency International. The SEC’s requirement (since 2004) for mutual funds to disclose their proxy votes has also been a great help.

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5 Comments

  1. Mark,

    I stumbled upon your blog while doing some researching regarding the stealing of ON2 Technologies (ONT) by it’s BOD and Google. If you truly stand for the rights of individual investors, then this hostile attempt to sell ON2 without shareholder support must be investigated. Hundreds and hundreds of emails, letters, and calls over the last five month to the SEC for an investigation has on unanswered, save some generic reply about we take your concerns seriously, but cannot confirm or deny that we are looking into this matter.
    I will not bore you as to how On2’s BOD have breached their fiduciary obligations to it’s shareholders, forcing shareholders to accept an artificially lowered valuation for the company, setting the shareholder of record to favor short term traders and arbitrage funds, send out 5+ sets of proxies and multiple phone calls to solicit Yes votes, clearly stating that a “no vote is a vote against”in the proxy, but adjourning the meeting twice to “allow more shareholders to vote yes”.
    After two failed attempts to get a majority of YES votes, the BOD has now decided to further adjourn the special meeting to Feb, 17th 2010, with a shareholder of record being Jan, 15th. http://finance.yahoo.com/news/On2-Announces-Further-prnews-3457478766.html?x=0&.v=1

    The vote and fate of On2 is no longer in the hands of us individual long-term shareholders, but in the hands of Arbitrage funds and Googles proxies. I urge you, beg you, plead with you to look into this matter. We, individual investors feel truly helpless and lied to.

    Respectfully,

    James Wang

    Comment by James — December 25, 2009 @ 12:22 pm

  2. How is it possible for the BOD to change the record date simply because the vote did not go their way? This means that any buyout or merger can be completed at the price the buyer wants because if they do not get the votes they can just cange the date and with their deep pockets buy as many shares as necessary to swing the vote their way? Something smells rotten with that thinking. Seems the me that the voice of the shareholders was ignored.

    Comment by Steve Damico — December 25, 2009 @ 3:45 pm

  3. Dear Mr Latham,

    I am writing to you with the hope that you might take a moment of your valuable time to look at the grave injustice unfolding as Google Inc attempts to absorb On2 Technologies, a small but rising star in the field of video compression software. In short, a corrupt Board of Directors and interim CEO at On2 Technologies coupled with the hegemonic goals of Google Inc have placed the legality of the entire merger process in question and cast a dark cloud over the investment community. One need only look at the recent vote by shareholders against the merger and the questionable actions by On2 management to ascertain gross impropriety and fiduciary negligence. Though you may lack the influence at this early stage of your SEC membership, I do believe you posses the requisite knowledge and experience to set the wheels in motion and bring purposeful scrutiny to the entire merger process.

    Kind Regards,

    Bruce
    On2 shareholder

    Comment by Bruce — December 25, 2009 @ 11:13 pm

  4. Mark,

    I stumbled upon your blog while doing some researching regarding the stealing of ON2 Technologies (ONT) by it’s BOD and Google. If you truly stand for the rights of individual investors, then this hostile attempt to sell ON2 without shareholder support must be investigated. Hundreds and hundreds of emails, letters, and calls over the last five month to the SEC for an investigation has on unanswered, save some generic reply about we take your concerns seriously, but cannot confirm or deny that we are looking into this matter.
    I will not bore you as to how On2’s BOD have breached their fiduciary obligations to it’s shareholders, forcing shareholders to accept an artificially lowered valuation for the company, setting the shareholder of record to favor short term traders and arbitrage funds, send out 5+ sets of proxies and multiple phone calls to solicit Yes votes, clearly stating that a “no vote is a vote against”in the proxy, but adjourning the meeting twice to “allow more shareholders to vote yes”.
    After two failed attempts to get a majority of YES votes, the BOD has now decided to further adjourn the special meeting to Feb, 17th 2010, with a shareholder of record being Jan, 15th. http://finance.yahoo.com/news/On2-Announ

    The vote and fate of On2 is no longer in the hands of us individual long-term shareholders, but in the hands of Arbitrage funds and Googles proxies. I urge you, beg you, plead with you to look into this matter. We, individual investors feel truly helpless and lied to.

    Respectfully,
    KOUKOUFIKIS I.

    Comment by KOUKOUFIKIS — December 26, 2009 @ 12:22 am

  5. […] — votermedia @ 4:09 pm In the past three days I’ve received emails and comments (here, here, here & here) from shareowners of On2 Technologies – see the Yahoo Finance On2 message […]

    Pingback by On2 Shareowners Rebellion « VoterMedia Finance Blog — December 28, 2009 @ 4:10 pm


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