Another Shareholder Proposal? McDonald’s Deserves a Break Today – WSJ

Sigh.  Another whine about those pesky shareholders from those who insist they are the ultimate capitalists.  James R. Copland of the Manhattan Institute, which is funded by right-wing foundations (whose names should be disclosed in published material like this column), writes in the Wall Street Journal that poor McDonald’s should not have to bear the terrible burden of shareholder proposals.  He argues that the oxymoronically named CHOICE Act would not go far enough in merely requiring investors to hold one percent of the stock to submit a shareholder proposal; he wants to eliminate all “social” shareholder proposals entirely.  Since “ordinary business” proposals are already prohibited, that reminds me of the baseball manager who said that his team couldn’t win home games and couldn’t win away games “so all we have to do is find another place to play.”

He writes:

According to an SEC survey, it costs more than $100,000 merely to respond to a shareholder proposal and include it on the ballot. The far greater cost comes from the distractions such proposals create for directors and senior executives, as well as the risk that companies will change their policies under pressure.

We are find this self-reported, self-serving number highly suspect.  If, as Copland says, the proposals are re-submitted, how expensive can it be to cut and paste the previous year’s rebuttal?  How much time can it take for executives and board members to vote to oppose it again?

He also complains that some companies have made changes to respond to shareholder proposals, even if they did not get a majority vote.  That’s called a market-based response.  Since even a 100 percent vote is advisory only, we have no concerns that the executives and board members who have all of the decision-making power will be unduly persuaded unless the case is effectively made.  This is literally why we pay them the big bucks.

I do share some of Copland’s frustration with the shareholder proposal process, however.  I wonder if he would be willing to support my suggestion for improvement: no more shareholder proposals, but a strict majority vote standard so that instead of raising issues like the transparency of political contributions and the sustainability of the supply chain through non-binding proposals, a majority of shareholders can simply remove directors who are not satisfactory.


Source: Another Shareholder Proposal? McDonald’s Deserves a Break Today – WSJ

One Comment Add yours

  1. I think the cost estimate of $100,000 is based on a Chamber of Commerce report, who got it from Prof. Bainbridge, who estimated it cost companies $87,000 to first seek to exclude a proposal and then include it if that effort failed. The Chamber of Commerce said there was an “Implied cost of $87,000 per proposal based on the assumption that corporations seek to exclude all proposals, multiplied by the 1,042 shareholder proposals tracked by Institutional Shareholder Services (ISS) during the 2003 proxy season.” Of course, much of that expense is the amount companies spend hiring outside counsel to draft arguments hoping to get a letter from the SEC allowing companies to exclude proposals. Most companies don’t take that step, so the Chamber’s assumption that corporations seek to exclude all proposals is wrong. In fact, only about 1/3 of proposals go through such a process. Most proposal either get placed directly on the proxy at minimal cost or the company negotiates withdrawal with the proponent in return for implementation or progress on the issue. Copeland first inflated an already questionable cost, then multiplied it by a faulty assumption to create another bit of fake news with just enough truthiness that uninformed people believe him.


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