Comments on: Shareholders aren’t regulators http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: Paul http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/comment-page-1/#comment-6945 Fri, 18 Sep 2009 17:54:58 +0000 http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/#comment-6945 Regulators should be in place to make sure that same rules apply to everyone and also to enforce transparency. I, as an investor, want to be able to trust the system. We should simply hold everyone to the same standard.

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By: Brown Ram http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/comment-page-1/#comment-6897 Thu, 17 Sep 2009 14:56:25 +0000 http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/#comment-6897 A couple of observations:

–Proxy aggregators already exist to an extent. Certain institutional shareholders will always vote the way Riskmetrics (formerly ISS) or Glass Lewis tells them to vote. Haven’t spent a lot of time looking at the materials that Riskmetrics and Glass-Lewis put out and having recently had to negotiate with them about certain positions they have taken with regards to a shareholder meeting, I think that they’ve been drinking too much of their own whiskey.

–I think that Salmon and several of the commentators are espousing the traditional observation that equity holders are in no position to govern corporations effectively. They don’t have the time to manage. Mutual fund managers and most other types of institutional shareholders also don’t have the time to manage. This is why guys like Ackman are, arguably, so valuable–but there can only be so many Ackman’s in the investing world.

–With regards to better or more regulation, the trick is to regulate in a way that doesn’t directly affect the market. For example, structural regulations (requiring segregation of client assets or segregation of business types) probably makes more sense than dictating things like capital and leverage ratios.

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By: Milo http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/comment-page-1/#comment-6884 Thu, 17 Sep 2009 10:37:55 +0000 http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/#comment-6884 Still, I think there’s a problem with the modern “absentee owner” shareholder. While in cases of concentrated ownership we expect that person to be responsible for the company, it is not clear (to me) that those responsibilities *really* end up with someone in a modern corporation. Perhaps you can cite the big institutional investors and claim the smaller folks are free-riders on their efforts? Seems less than the same to me…

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By: dollared http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/comment-page-1/#comment-6878 Thu, 17 Sep 2009 05:46:39 +0000 http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/#comment-6878 I’m thinking that Mr. Spitzer is playing the angles here. He has no fear that if he were William O. Douglas to Obama’s FDR, that the two of them could put teeth into regulation, at least for a while. If only for Elliot’s private habit of self-indulgence and Obama’s public habit of refusing to make enemies…..sigh.

So, pursue strong regulation but push on the other side of the equation as well. It sure wouldn’t hurt our economy’s risk profile or productivity if shareholders managed to figure out that the principal activity of senior executives in American business is a daily game of kleptomaniacs’ circle jerk, and then shareholders decided to do something about it. It might actually clean things up a bit if derivative suits were revived and shareholders’ lawsuits were more common and more lucrative.

Finally, it’s great positioning to set the whole angle up as “let the market self-regulate.” After all, he almost sounds like Greenspan for a minute there, and what could be wrong with that, if you’re the WSJ editorial page?

So, push on this new angle, and of course, keep trying on the other. Maybe someday an honest person could be an EVP of a Fortune 500 company.

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By: dWj http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/comment-page-1/#comment-6875 Thu, 17 Sep 2009 03:10:52 +0000 http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/#comment-6875 Can’t we do both? I very much support giving shareholders more power versus management, but that doesn’t, as you note, address the systemic issues, on which the government really ought to be ramping up.

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By: lowrie glasgow http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/comment-page-1/#comment-6873 Thu, 17 Sep 2009 01:22:11 +0000 http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/#comment-6873 My plan above could be used for indirect holdings in funds considering our current computer power . Voting power could be given to the fund holder who would be able to select form a large list of organizations that would handle the holders proxy.

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By: Sechel http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/comment-page-1/#comment-6872 Thu, 17 Sep 2009 01:11:50 +0000 http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/#comment-6872 We have too much stock indirectly in public hands instead of directly in public hands. Agency capitalism does not work. This is why directors do not consider the will of the stock-holder. We need a culture where Mr middle America invests in a company as a long term stock holder.

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By: lowrie glasgow http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/comment-page-1/#comment-6870 Wed, 16 Sep 2009 23:47:45 +0000 http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/#comment-6870 We need proxy aggregators. I would gladly pay an organization that would vote my interest. I should be able to do this through my web based brokerage account on any of my holdings.The organizations could be for profit or non-profit.I would pick to maximize longterm gain while others may have other criteria. Transparency of votes is a given. The proxy relationships would be indefinite in time but revocable .

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By: KenG http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/comment-page-1/#comment-6869 Wed, 16 Sep 2009 23:22:33 +0000 http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/#comment-6869 It’s not an ideal solution, but given that the government refuses and/or is unable to regulate publicly owned companies, we don’t have many other viable options. Adding more regulators who will continue to not enforce or not understand the issues will not solve any problems.

And while 99.9% of shareholders may not be qualified to perform the oversight function, the 0.1% who are, and who own maybe 10% of the publicly traded companies, have incentive to enforce accountability. What they don’t have is any teeth. Arming them with certain rights will force execs to stop ignoring dissenting shareholders.

Of course, if shareholders are profiting from companies that are breaking laws, this will not stop that kind of behavior.

Or we can just do nothing and cry the next time a company defrauds stockholders or breaks the law.

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By: The Epicurean Dealmaker http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/comment-page-1/#comment-6865 Wed, 16 Sep 2009 21:13:18 +0000 http://blogs.reuters.com/felix-salmon/2009/09/16/shareholders-arent-regulators/#comment-6865 Indeed, Felix, it is a stupid idea.

In fact, someone or other–Lucien Bebchuk, methinks?–has made the very good point that shareholders were complicit in the dangerous levering up of publicly owned financial institutions in pursuit of higher returns. Given diversified portfolios, public shareholders should be even more indifferent to firm failure than their employees.

Spitzer seems to be trapped in the late 1990s/early 2000s “as long as you give ever more disclosure to the poor shareholders everything will be alright” mindset. He completely misses the point.

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