Now that the cherry blossoms and the tax deadline have passed, another rite of spring is about to begin -- the annual stockholders meeting. From now until June, this yearly display of corporate democracy will be in full flower.
This year dazed executives coming off the worst recession in a half century will find themselves facing angry stockholders complaining about poor or non-existent profits and reduced dividends.
But causing even more dread for some executives are the gadflies, shareholder activists who sometimes raise a ruckus along with their resolutions. Executives generally consider their proposals, which range from nuclear power to corporate perquisites, as irrelevant and a costly waste of time.
The Securities and Exchange Commission sympathizes with that view -- it estimates the cost of including a proposal in a corporate proxy statement at between $10,000 and $15,000 -- and is proposing rules to rein in the activists next year.
According to the American Society of Corporate Secretaries in New York, which tracks 85 percent of the shareholder proposals made each season, seven individuals and their organizations accounted for 52 percent of the proposals made in 1982. Adding various church groups involved raises the total to 63 percent.
Of 972 resolutions made last year at meetings of 358 companies, 198, or 20 percent, were made by the brothers Lewis D. and John J. Gilbert of New York, Andrew W. Duncan of Hampton, Va., who champions conservative causes, made 100 proposals and Washington's Evelyn Y. Davis, 74. The Interfaith Center on Corporate Responsibility, located in New York, made 98.
This year's crop of proxy proposals, which is expected to approach the record number made in 1982, includes the familiar issues of disinvestment in segregated South Africa, disclosure of international loans, and restraint of sales of infant formula in underdeveloped countries.
According to the SEC's deputy chief counsel, William Morley, who keeps track of these suggestions, there will be somewhat more emphasis on weapons production this spring.Among new campaigns will be calls for airlines to set aside no-smoking areas in airports, and for companies to report on their lobbying in support of the sale of Awacs planes to Saudi Arabia. The latter proposal is being pushed by the American Jewish Congress, which opposes the deal.
The Securities and Exchange Act of 1934 requires inclusion of all shareholder proposals in a company's proxy statement unless they fall into automatically excludable categories such as personal grievances or shareholder invasion of management functions. When in doubt, corporations leave the decision up to the SEC, which said it spent 1,208 hours last year processing 487 resolutions.
Last October, the SEC, citing what is considered unnecessary burdens on both public companies and the commission, devised three reform measures:
* A sponsor would be limited to one proposal per meeting, and would have to be the owner for at least a year of a minimum of $1,000 worth of stock in the affected company.
* The SEC would be removed from the process of deciding what proposals go in a proxy statement.
* A company would be required to list all stockholder proposals unless it received more than 12; then it could draw lots to decide which 12 to include.
Of the 375 comments on these reforms received to date by the commission, 58 percent wanted to leave the present system alone. Sixty-three 63 percent of all the responses came from individual and group shareholders, who opposed change 217 to 20. The other comments from stock issuers, institutional investors and lawyers supported the concept of limited access to the proxy by 114 to 24.
To a varying degree these reforms represent a radical departure from current law. A much simpler alternative was proposed recently by SEC Commissioner Barbara S. Thomas. "In effect," she said, "the present system has allowed investors with the barest economic stake in a corporation to turn its proxy statement into a political document and, as often follows, its annual meeting into a personal forum."
She would have issuers omit the name of the proposing shareholder from proxy material. (Although the name is not required, nine out of 10 companies include it.) With public notoriety removed, Thomas believes, corporations would witness a "natural decline in the number of political and personal resolutions that have begun to permeate the proxy statement." Shareholders would, however, be able to ascertain the name of the proponent by writing to the company or the SEC.
Stockholder activists were vehemently opposed to her idea. "It's an outrage," said Lewis Gilbert. "It's not full disclosure. Stockholders would be deprived of communication."
Duncan, who claims to have kept a "low profile" as an activist, nevertheless said he didn't think it was a good idea to omit names. Edward C. Calvert of Willowick, Ohio, the author last year of 83 proposals on corporate practice, argued that shareholders need to know who made the proposal in order to weigh its merits. Moreover, identification draws shareholders to express their feelings on issues to him, which he turns into proposals.
Wilma Soss, who heads the Federation of Women Shareholders, attributed the proposal to "a certain party that gets a lot of publicity in Washington."
But Thomas denied the idea was directed against Evelyn Y. Davis or anyone else. (Davis responded that "Wilma soss is envious of my publicity now that she is no longer very active. But there is no one more interested in publicity in Washington than Barbara Thomas.")
In any event, activists interviewed maintained that a ban on naming sponsors would not affect either the number or the nature of resolutions they initiate. Nor would the SEC's suggestion of a minimum equity interest in the company as a prerequisite for introducing a proposal, they said.
(Davis and Duncan, incidentally, endorse the minimum, while Soss feels it would be too complicated to enforce.)
The SEC will decide this summer on whether and how to curb shareholder proposals.
Meanwhile, companies from AT&T to Xerox are preparing for the gadflies. Gilbert will take in 100 mettings this year; his brother John, 50; and their affiliates, another 50 to propound their ideas on corporate governance.
Calvert plans to bombard 30 companies with his newest suggestion to make corporate income tax statements availble to shareholders. The Interfaith Center on Corporate Responsibility has aimed 65 resolutions on 12 issues, including nuclear power and baby formula.
Duncan will pepper 14 companies with his opposition to corporate contributions to universities that impede CIA recruitment on campus or that refuse to allow the armed forces in recruit on grounds the military discriminates against homosexuals.
Davis plans to attend 60 or 70 meetins this year, including the ITT gathering in London. Her resolution at that meeting: that ITT restrict its meeting location to the USA.