Nell Minow
Appearances
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
This is going to sound almost quaint at this point. I invested originally quite a long time ago because I was excited by the idea of electric cars. And that's it. And so I invested and did quite well. And then last year, just this time last year, right after proxy season, I voted no on the pay plan. So I held the stock long enough to do that. And then I donated almost all of my stock to charity.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
It had tremendous capital gain. I didn't really want to I have to pay taxes on it. I didn't want to hold it anymore. This is the part that's going to sound quaint. Why did I decide to get rid of the stock? Because Elon was involved in too many other things. I didn't think he was doing a good job as the CEO. As you know, he's got a lot of side hustles. He's got the rocket ship.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
He's got the brain thing. He's got all of that stuff he was working on. I didn't think he was going to be able to devote the time and attention to tesla that was needed and i was outraged that he wanted to pay himself 56 billion dollars Just to do his job. Well, so now he has another side gig. Well, I know. That's why it sounds kind of quaint that I was worried about, you know, the rocket ship.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
But here he is devoting. It's not just the rocket ship. Right. Like SpaceX.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Yeah. Yeah. Neuralink. All of that. All of those other things that he was doing. Artificial intelligence. Everything. And he just seemed very unstable to me, as he still does. And so, OK, now he's got a side gig that is definitely a full time job. And he brags about how much time he's spending on it. And the company, the board of directors has completely failed.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Normally, you would have to file an AK and say our new acting CEO is so and so. They won't even tell us who's running the store there.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Nothing, because he owns such a significant block of the stock and he controls the board. The chair of the board testified under oath, as I think we would agree was correct, that the $600 million she's been paid for being on that board has been a life-changing event. I think we would agree that that's always going to be a life-changing event to get paid that much.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
But Upton Sinclair said it's impossible to make a man understand something if he's making a lot of money not understanding it. And that's the case with that board. They're absolutely useless. And that was why I didn't have any confidence in the company anymore.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Yeah. I'm saying that about the whole board. There's serial killers of shareholder value. And the problem is, on top of everything else that we've talked about, is that Elon Musk took the high risk, high reward decision that he was going to make himself the brand. And, you know, we've seen CEOs do that before. Steve Jobs did that very effectively at Apple with his iconic black turtleneck.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
And everybody just believed in him as being such a whiz kid. And Walt Disney, you know, still the brand of Disney. But. You have the downside of that is when somebody like Mike Lindell decides to get very involved in politics and now is saying publicly that his only remaining assets are his car and his house. People, you know, markets are wonderful. Markets are efficient.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
And the market responded to his behavior, Mike Lindell's behavior in a very powerful way. And I feel that that's also happening with Tesla. I mean, I am I know everybody has seen these, but I just this week was driving behind a Tesla that had a bumper sticker that said, I bought this before Elon went crazy. Oh, yeah.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
I took a picture of it.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Yeah, Mike Lindell was doing great with MyPillow. And now Fox won't let him advertise anymore because he hasn't paid his bills. So it's because he he decided that he was going to go all in for Donald Trump and for challenging the election results in 2020. And consumers didn't like that.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
No, I kept it specifically kept it long enough to vote against it.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Yeah.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Yeah, I gave a lot of interviews saying that he should that it was an outrage. There's no human being is worth that. And he's already made all the money in the world. the way he should have from his investment. And if very often the board will say, this is retention, this is all about retention.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Well, maybe we don't want to retain him and he should be sufficiently motivated by the investment he already has in the company. He should not be siphoning off the shareholder money to pay himself even more just because he took a beating on Twitter.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
right and that is the way pay should be structured yes nicole i agree to that pay plan for you but he was getting paid for what he hadn't he got paid plenty for achieving those goals he's the richest man in the world he got paid plenty but there's diminishing marginal utility of that additional dollar. And, and he was, as I said, he wasn't there. He was off doing other things.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
He was tweeting all day long. And so, no, you don't pay him that he's already should be already incentivized by the amount of stock he has. If he creates value for shareholders, then he will create it for himself. But this is it. I, but he created these big pie in the sky.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Yeah, and he got paid more than enough for that. This is how you have to look at it. Every single dollar that goes to a CEO should be looked at in the same way as any other expenditure made by the board of directors. And that's one metric, return on investment. And the return on investment for these outrageous pay plans that these CEOs are getting is less than a piggy bank.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
You know, we look for the return on investment from the money that they spend on R&D, for the money they spend on marketing, for the money they spend on their employees. You have to look at it in a very green eye shade, sharpen your pencil way. But the problem is. We're paying CEOs outrageous amounts.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
The market was tremendously strong during the 50s and 60s when the CEO pay package was something like 13 times the average employee. Now it's hundreds of times, even thousands of times the average employee. And by the way, that's one of the other achievements that shareholders have achieved. can mark up to activism.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Now it's in the law that the companies have to tell you on the proxy what the ratio is between the CEO pay and the average employee. And that's a really good metric to look at. So what do you think Elon should have gotten paid? You know, I think something in the tens of millions, maybe 100 million for achieving a great goal.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
But it's also very important that you have a downside as well as an upside to CEO pay. And very often that doesn't happen. I talked to a compensation committee chair once who said, well, he didn't meet the milestones and
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
uh he made some very hard decisions so we had to give him the bonus anyway and i said okay if he made hard decisions that are going to pay off in the long run then we pay him in the long run we i know you're going to pay him that so don't pay him for that now so you know elon musk No one deserves a pay package of $58 billion.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
If you are Bill Gates or Elon Musk, and you create something that makes a lot of money, or Mark Zuckerberg, and you create something that makes a lot of money, and you make money that way, that's fine. But we're talking about his pay, his salary, and he did not deserve that.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
I know that. He's not the founder, but he did bring the company forward.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
SpaceX, right. Yeah. Good for them. They've got the astronauts home. But Yeah, he should. So tell us how you really feel now. Well, I'm very fortunate to have a job where I get to express very strong feelings all the time.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Just 20, because I wanted to continue to get the shareholder communications. And I can promise you there's going to be a shareholder lawsuit over what's happening now at the company. And I will be happy to be part of that lawsuit.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
I think it's a long shot. And I would think that they would have to make some very... major changes to the management. They'd have to bring in a really good person who will actually be in the office and be running things there. Then I think it could, but it's interesting
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
He's the company kind of sailing into some headwinds right now because the administration is doing a lot to promote oil and gas guzzling cars rather than electric cars. So I'm not sure if it does. Maybe someday, maybe it'll hit that. And I hope it does. But I don't think it will do it with Elon Musk in his current situation.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Just like the grocery store can't block you from buying bananas.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Well, there are very, very strict rules at the SEC that if, say, I wanted to be an activist, and I have been an activist in the past, if I bought a certain amount of stock with the intention of affecting the company in any way, It's a very low bar to reach. I would have to file a public statement with the SEC saying exactly what I intended to do. And so they don't need to scope anything out.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
It is a season. Usually it's in the spring. So we're just starting it. But now is when the companies have their annual meetings. And more and more of those companies are doing them virtually. So you don't have to travel. Just about anybody can attend a shareholder meeting. And that means you can ask a question and you can hear what other shareholders are saying.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
It's already out there.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Well, I'm glad you asked that because one of the reasons that shareholder activism is all of a sudden happened in the 1980s is that companies were paying what was called green mail to activists to get them to go away. They paid, General Motors paid Ross Perot a ton of money to stop bugging them. And that's not good for shareholders.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
And that's why all of a sudden shareholders who had been very passive up until that point and had pretty much adopted what was called the Wall Street rule, vote with management or sell the shares, said, wait a minute. All of a sudden, both raiders and entrenched insiders are abusing our rights. We better wake up and do something about it.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
And that's why the Council of Institutional Investors, which is the trade association, celebrated their 40th anniversary last week. That's exactly what started it, was the payment to Ross Perot of Greenville.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Yeah. Ross Perot was raising some very legitimate questions with General Motors, which was a terrible investment at the time. And the company said, we'd rather pay you to go away so we can continue on exactly the path that we're on. And, you know, they were getting their butts kicked by Japan and by their competition. So in the United States. So. So, yeah. But he didn't take it.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Who? Ross Perot? Yeah. Of course. Oh, go. Yeah. How do you think he got so rich?
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
He was already rich, but he got much, much richer. And there are other raiders who are doing the same thing.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
And. And shareholders were outraged by this. You know, it's fascinating to me because I went to the University of Chicago. I'm a free market person. I always say I represent the people capitalism is named after, the people who provide the capital. I love capitalism. I've started four companies myself.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
So I love capitalism, but the people who rhapsodize about the purity of the free market just get weak in the knees when the free market doesn't like what they're doing. And they either want to shut up their critics, they want to make it impossible for them to raise these questions or to go public with them. And I don't understand that at all.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
It seems to me, and I can say as a person who has started businesses, As difficult as it is, the people who complain to you, the customers who complain to you are your best friends because they tell you how to do better.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
But, you know, I'm the co-author of a textbook, an MBA textbook about corporate governance. And my favorite page in the textbook I didn't write, which is a chart. of all of the top 20 companies by market cap by decade. So it goes like the 1950s, 60s, 70s, 80s. These are the top 20 companies in America by market cap.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Now, it's not going to surprise you that for a long time, we're seeing the same names, the same names, the same names. Then all of a sudden, Thank you very much. , , , , , , . P P P P Z «, «, grad, grad, grad, grad, grad, grad, t. S con
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
That is true. I did hear from an executive at Microsoft that people were getting up at the annual meeting and asking IT questions. That's not appropriate. You want to ask questions.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
about things that the shareholders.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
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Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Yeah, right.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Well, of course, one of the great things about a share of stock is that it is about as liquid as it can be. You can sell it anytime you want if you're not happy with what the company is doing. But you do have another alternative. You can push them to do better. And for example, if you are unhappy that a lot of companies have dropped their DEI policies have stopped disclosing certain things.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
You don't have to sell your stock. What if you still like the company? You just think that that's a risk for you as an investor. You can write them a letter. You can go to the annual meeting and vote against the board of directors. You can file a shareholder proposal if you have more than $2,000 worth of the stock and have your proposal voted on by all the other shareholders.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
And then if you really want to up your game, you can join in a lawsuit or even run for the board yourself. Wait, $2,000?
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Well, you have to do a few months ahead of time. Their last proxy will tell you what the deadline is for filing a new shareholder proposal. And there are a lot of restrictions. And when Trump is in office, there are more restrictions. So he put some in. Biden took them out. Trump has now put them back. And so your subject matter is limited. It's not just not asking IT questions.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
It has to be obviously something that the company can address. It has to be not personal to you. It has to be a general subject. And there are other kinds of restrictions. You also only have 500 words. whereas the company has all the words that they want to respond to you.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
But if you follow those rules and your best bet, particularly if you're new at this, is to find a proposal that's already passed muster and just submit that, even if it's not your number one priority, as to get your foot in the door, because then they'll call you and you can talk to the company about what some of your issues are.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
It's a good way to get their attention because they would love to negotiate with you. They would rather not have everybody vote on it.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
That's right. They used to call them raiders in the 80s when Carl Icahn first got started because they don't always do things that are beneficial to all shareholders. They very often take a piece of the cake and they don't leave anything for anybody else. But many shareholder activists do act on behalf of all the shareholders.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
And it's good to sort of get acquainted with them and know what's happening. Now, the big thing. Household name companies get a lot of shareholder proposals. I think Amazon had something like 11 this year. Most companies don't get any. But that doesn't mean that you can't still go to the annual meeting virtually and ask a question.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Yeah, I always say that board of directors... Sure, and you better vote. You should vote. I always say boards of directors are like subatomic particles. They behave differently when they're observed. So the more they know that you're paying attention, the more they will pay attention to you.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
And, you know, you have to remember that even if you don't own individual shares of stock, even if you're not a stock picker, even if you have a 401k, what I recommend to people... Generally, that is invested in an index fund or a mutual fund, which is great. That's what I recommend that people do if they don't want to devote a lot of time and attention to picking stocks.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
But what that means is that if you're with Fidelity or you're with Vanguard or you're with a fund like CalPERS, get in touch with them. Ask them, how do they vote their proxies? Are they voting against these ridiculous pay plans? You can find that out very easily. And again, the more people ask that question, the better they will be.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
The more that they think that you care about it, the better they will be.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
I love talking about him. I love him. And I'm very happy to be a Berkshire shareholder. So, yes, I just voted against those proposals. And what's so insidious about it is that the extreme right wing proponents who are all financed by they're all sock puppets for the same the Scaife Foundation, the Mellon Foundation, the Koch brothers, the very, very extreme proponents.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
right wing people who are very involved in a lot of political stuff, if you look at them very quickly, and most people don't want to spend a lot of time voting on proxies, they almost look good. They'll say, you know, proposal on diversity. Well, great, we like diversity.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
But it turns out that it's diversity, in their view, it's diversity, it's prejudice against white males, if you are paying attention to anybody else, if you're just trying to make your employees feel comfortable. And they say a lot of things that aren't true. They imply that DEI programs are about quotas, which they are not. They're just about expanding the applicant pool.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
And so, yeah, you do have to be very careful about it. It used to be the shareholder proposals were generally pretty good. But I'm happy to say that shareholders have been doing a great job on this. And a proposal like that at Disney... got less than 1% of the vote. And if you don't get, I think it's 5% of the vote, you can't even resubmit it next year.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
So people are being very savvy about those extremist proposals.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
They are directing the company. First of all, the most important thing to know about shareholder proposals is even if you get 100% of the vote, the company can still walk away from it. They don't have to do anything. They're only advisory, or to use the legal term, precatory. They only say, please think about doing this. That's all they do.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
And so that's one reason it makes me furious when corporate executives talk about activism in bad terms and say, oh, these people are trying to run the company. They're not trying to run the company. They can't. They can't. There's no impact on these proposals. But what they're saying is, please prepare a report. Very often, shareholder proposals will ask for a report.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Prepare a report on how you're being prejudiced against white Christian people. Something like that.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
It's a foot in the door because they don't like to have the proposals on the proxy and they will call you or they, most of them will call you and say, what can we do? to get you to withdraw your proposal. At least you can start the conversation that way. So we used to do proposals on things that actually companies really improved on, that you shouldn't serve on more than four or five boards.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
A lot of times there were people serving on 10 boards. You just don't have time in your life to do a good job on 10 boards. On conflicts of interest of directors, things like that. And companies have made tremendous improvement. Boards of directors are vastly better now than they were when I first got started in this field. Believe it or not, when I first got started in the 80s, O.J.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Simpson was on five boards and he was on an audit committee.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Yeah, Infinity Broadcasting. And there was a two-person audit committee. The other person didn't know anything more about accounting than OJ. He just wasn't famous. He didn't have a Heisman Trophy. But yeah, so there were a lot of... of people on boards who had no business being on them and contributed nothing. So boards of directors are generally doing a much better job than they did.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
And that's because of shareholder activism, because shareholders asked for better performance from the board of directors whose job is really to protect our interests. And there have also been a number of times recently where shareholders have rejected some of the activists.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
The guy that went against Disney, the shareholders said, no, we're not interested when he ran his own candidates for the board. So I think shareholders are also when I the shoulders I work with are the large institutional shareholders, the pension funds, the index funds, the mutual funds. And they've gotten a lot more sophisticated about voting proxies, too.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
They listen all the time. They don't always do. In the most outrageous cases, there have been companies where fewer than 50% voted for director candidates and they put them on anyway, which I think is just an outrage, or where the shareholders voted no on the pay package and they went ahead with it anyway.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
But generally speaking, I would say that they do take it seriously when shareholders are unhappy. I will tell you, I had a conversation once with a director who was explaining to me that the shareholders voted in favor of a particular shareholder proposal. And this company was really underperforming. And he said to the shareholders, he says, you don't understand. Those are fringe shareholders.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
And I said, they got 60 percent of the vote. You're the fringe.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
No question, it's the board. They're the ones that are there and they're the ones that do have the legal power and responsibility. But remember that directors, although Delaware is trying to weaken the obligations of directors, but generally speaking, directors... They have two duties.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
They have a duty of care, meaning they have to come to meetings, they have to pay attention, they have to do their homework, and a duty of loyalty, meaning that they have to remember that their priority is the shareholders, not management. And if they don't do those two things, they get sued.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
It's never fun. Depositions are brutal. Hard pass. Yeah.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Absolutely. They will ignore you. A lot of large investors in Tesla have raised their hands and said, hey, we need you to do a better job, Elon Musk, than putting your brother the chef on the board. I mean, come on.
Money Rehab with Nicole Lapin
Demystifying Shareholder Activism and Why Some Investors Are Mad at Elon
Oh, sure. There's so much to talk about.