IN THE 1990s INVESTORS learned there was a middle ground between the hostile takeover and the Wall Street Walk -- and that middle ground became the corporate governance movement. But the corporate governance movement has often left unanswered the question of how those governance mechanisms should be used.
But now a commitment to direct, year-round active ownership is emerging among all types of shareholders -- institutional investors, pension funds, individual shareholders, employee owners, participants in 401(k) plans. This commitment begins with shareholders seeking new proxy voting guidelines and reporting structures from their investment managers.
For example, faced with an unsustainable trend toward runaway executive pay, shareholders can directly engage captive compensation committees. Shareholders can also demand that executive search processes be opened up to look broadly for executive talent.
Large institutional investors can use the Internet to form quickly large blocks of shareholder opinion around breaking corporate governance events. These temporary shareholder voting blocks could find any number of ways to make their opinion heard by the board. They may demand access to the company proxy.