WHEN A GROUP of public pension fund managers from around the country met in Washington in February 1985 to create the Council of Institutional Investors, the shareholder rights movement was still in its infancy. To be sure, gadflies (some persistent and notorious) regularly pressured companies at annual meetings for greater transparency and accountability. And some institutional shareholders, like the New York City pensions funds, had already began to pursue an activist agenda, designed to assert the prerogatives of owners and impel companies in which they held stock to take appropriate -- or abandon imprudent-- courses of action.
But the founding of the Council of Institutional Investors (CII) provided a dramatic catalyst for the assertion of shareholder rights and the insistence by large owners that on issues relating to fundamental corporate policy the voices and wishes of stakeholders should prevail.
The initial agenda of the CII reflected the critical issues of the day: one share-one vote; the ending of preferential payments (called "greenmail") to select shareholders; the elimination of poison pills. But the fundamental struggle was to persuade corporate managers and directors that the historic pattern of ignoring owners must end. The days of passive shareholder acquiescence were over. The historic pattern of dissatisfied shareholders simply selling their stock and moving on was at an end.
A prime impetus for the shareholder rights movement was that, in the main, institutional investors no longer had that option. Many were...