Votermedia Finance Blog

December 28, 2009

On2 Shareowners Rebellion

Filed under: Uncategorized — Tags: , — Mark Latham @ 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 board, especially this post. Here is my response:

Thank you for contacting me.

Your horse has escaped, and you are chasing it through the forest. You want me to help chase your horse. I’m not good at chasing horses. I’m good at locking barn doors, and that’s what I’m doing. If I stop doing that to chase your horse instead, I won’t be much help at catching it, and meanwhile more horses will be escaping. But I do wish you success in catching your horse!

I lack the expertise and power to enforce the existing securities regulations, but I have the expertise and power do something much better: help create a long term solution for this type of problem at all companies. That is what I am devoting my time and energy to.

I will look into the On2 case at least a little, and talk to some people about it. But I am just one person, working as an unpaid volunteer on governance reform for thirteen years now. I have some associates and allies, but I don’t control what they do. We have been making substantial progress in recent years. If I work on the On2 case, it means taking time away from creating a better system with defenses against management abuse of power.

The mandate of the SEC Investor Advisory Committee on which I serve is to advise on the SEC’s regulatory policies. We are explicitly not invited to advise the SEC on enforcement, which is a good thing from my point of view, since I lack expertise on it. From the committee’s charter:

“The Committee’s objective is to provide the Commission with the views of a broad spectrum of investors on their priorities concerning the Commission’s regulatory agenda… The scope does not, however, include any policies, practices, actions or decisions concerning the Commission’s enforcement program.”

I hope the SEC will handle the On2 case appropriately. I haven’t investigated the case enough myself to know what is appropriate. In general I am very sympathetic to the side of shareowners, because I believe management abuse of power is commonplace. That is why I have undertaken solving this problem as my main work for the past thirteen years. My scope has expanded to include the abuse of power by political leaders also. See votermedia.org/publications, especially “Proxy Voting Brand Competition” and “Global Voter Media Platform”.

If any of you would like to help build a better system that empowers individual investors, let’s think of ways we can work together on that. Here are some websites and organizations that I see as leaders in this reform effort. It will take years of building. I encourage you to join, support and advise them:

VoterMedia.org (I’m Executive Director)
ProxyDemocracy.org (I’m on the board)
MoxyVote.com (see blog posts re On2)
Shareowners.org
Corpgov.net

Here is a specific strategy that I think is now one of the best ways forward to empower individual investors: Choose a few small companies like On2 that are mostly owned by individuals directly (rather than via mutual & pension funds). Submit shareowner resolutions proposing that the company spend $20,000 per year to support blogs about the company. These funds would be allocated among competing blogs, by vote of the company’s shareowners. Anyone could enter a blog in the competition by paying a modest entry fee. This system would support independent monitoring of management policies.

We don’t even have to wait until we start funding the blogs via the companies we own. We can enter blogs and vote now at votermedia.org, which has been developing and testing a system for this purpose. I recently created a ballot for On2 at votermedia.org/communities/291-on2.

Philanthropists can also donate funding to demonstrate the benefits of this voter funded media (VFM) system. I have donated over $30,000 so far, mostly for blog competitions at the University of British Columbia’s student union, where we have now convinced “management” (student council) to fund the competition from student fees – see votermedia.org/communities/82-ubc-ams.

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4 Comments

  1. mark anything you can and will do will be appreciated. we know you cannot do it yourself but talking to the rite person may help more than you know. this is a good site http://www.vote4on2.com/ to get info on this case best place to start is at the top on the right side marked new new new in red. thanks sammy

    Comment by sammy braswell — December 28, 2009 @ 8:17 pm

  2. We, the majority shareholders of ONT (On2 Technolodies Inc. )had voted down the proposed merger to google’s subsidiarey OXIDE INC on Dec. 18 /09.Our management illegally ignored our winning result and continues to postpone the vote amid change of conditions until THEY get their result. This constitutes an illegal scam.They bribed off every legal class action suit we started ( 5 ) therefore we have no legal representation and they do what they want.

    Comment by Josef Hanisch — December 29, 2009 @ 12:27 am

  3. Mark, Many thanks for your thorough response. I will copy the addresses you have offered for future corresondence regarding the manipulation of the market which has contributed greatly to the situation we find ourselves in. The total absence of any empirical evidence of the SEC taking any action, other than holding hearings followed by extensions to later times without any decision for almost a whole year regarding the so-called Uptick rule attests to the massive power of the beneficiaries of the status quo.
    High Frequency Computerized Trading; all short selling; access to the same information as professionals of daily market action, including no way for retail investors to distinguish between real supply/demand and that which is fabricated by specialists, marketmakers and short traders; the ability, (demonstrated every day in this stock)of some unknown (to us) entity to control the flow of trades at the close to “paint” it to a low for the day, etc.etc.—these are some of our concerns you may report as areas for Ms. Schapiro to respond to. She has received plenty of emails from us, pleading with her to enforce the rules in effect and to changes in some of them if she ever intends to establish the “fair, open and honest market” which her regional director in Boston, Ma, has advertised as their charge.
    Thank you again for your response and, more importantly, for taking the action which has placed you in the position to do something about the truly deplorable situation ordinary investors find themselves in vis-a-vis their own government. Have a Happy New Year!! george c. vlahos, byield, Ma 01922 978-462-6796

    Comment by george vlahos — December 29, 2009 @ 10:18 am

  4. Hey Mark,

    After reading your post regarding On2, I must say that I do not blame you a bit for being cautious with your statements. I do appreciate the fact that you will look into the case a bit further and talk to a few people, hopefully in the SEC regulatory enforcement dept., for advise.

    We certainly did not expect you to chase down our run away stallion by yourself. But we were hoping you’d kick down the door to the bunk house and tell the ranch hands to get off their asses and do something. After all, that’s what they are being paid for.

    I was also hoping for some specific strategies that can help On2 shareholders right now. It’s a bit late for shareholders and the BOD to come together and sing Kum-bi-ya. They have completely lost the trust and respect of the shareholders, nor do they care what we think. They’re minds were made up in August and there is no turning back for them.

    Sadly, we retail On2 investors currently have no public platform to deliver our position, save a few message boards. On2’s legal department has been working overtime to quash any attempts we’ve made at a PR. An article from a member of the SEC Investor Advisory Committee, regarding individual shareholder rights, would sure go a long way in bringing this David vs. Goliath story to the public’s attention. Here is one example: http://finance.yahoo.com/news/Two-Consumer-Groups-Try-To-paidcontent-3123712786.html?x=0&.v=2

    There are some smart and constructive comments being posted on this topic, let keep the dialogue open, and brush up on our collective lassoing skills.

    All the Best,

    James Wang

    Comment by James Wang — December 30, 2009 @ 7:08 am


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