Corporate gadfly: 'crusaders or crackpots'?

• Author: Milford, Maureen
• Position: THE STATE OF CORPORATE DEMOCRACY - Interview

They sometimes bring spectacle and showmanship, like the time colorful Evelyn Y. Davis arrived at the 1971 annual meeting of Communications Satellite Corp. in hot pants and knee socks. Another time, John J. Gilbert sported a clown nose at a Mattel annual meeting in the 1970s.

Theatrics aside, activist shareholders known as "corporate gadflies" have been responsible for significant improvements in corporate governance, explains Nell Minow of Washington, D.C., a long-time expert in governance matters.

"The gadfly gets the animal to move," Minow says, referring to the flies that bite livestock and is a name sometimes applied to provocative people, including Socrates.

Gilbert, and his brother Lewis, pioneered the field after the 1929 stock market crash, she explains. The brothers' corporate accountability crusade led to many of the shareholder rights now taken for granted, such as the right to ask questions at annual meetings.

When John Gilbert showed up at the 1939 DuPont annual meeting he was the only shareholder there, he told Chemical Week in 1997. The well-off Gilberts stood alone for decades, Minow notes, until they were joined in the late 1940s by public relations professional turned shareholder champion Wilma Porter Soss; then followed by Davis a decade later. Davis became the bane of many CEOs' and boards' existences.

A 2002 Vanity Fair profile of Davis proclaimed: Crusader or crackpot, 72-year-old shareholder activist Evelyn Y. Davis is an unstoppable force. CEOs from Ted Turner to Jack Welch have endured her wrath, and even complications from her third facelift haven't retired America's noisiest corporate gadfly.

CEOs got a break from Davis beginning in 2012 after she slowed down her activism at age 82, Reuters reported.

So are gadflies crusaders or cranks?

"I think they're a useful part of the dialogue we need to have about corporate governance and pay practices," says David Larcker, director of the Corporate Governance Research Initiative at Stanford Graduate School of Business.

Critics, however, say the huge number of gadfly proposals filed annually waste corporate money and time, Larcker wrote in 2016. Few proposals get majority support, he wrote.

"Corporate America is being held hostage by three people you have probably never heard of," wrote Steven Davidoif Solomon in a 2014 DealBook column in The NeivYork Times, referring to the three gadflies who have filed the most proposals in recent years--John Chevedden, William Steiner...