Is this a Shareholder Spring?

 

Is this a Shareholder Spring? All is not well at UK based international corporations like Astra Zeneca Aviva Trinity Mirror. The shareholders are revolting and hapless Chief Executives Andrew Moss David Brennan and Sly Bailey have all been forced to resign.

Added on 23 May 2012 by Erika Lucas

Is this a Shareholder Spring?

Is this a Shareholder Spring?

All is not well at UK based international corporations like Astra Zeneca Aviva Trinity Mirror. The shareholders are revolting and hapless Chief Executives Andrew Moss David Brennan and Sly Bailey have all been forced to resign. This is not about meanness or envy; it is about hard commercial logic. What is new is shareholders have been able to turn latent power into energy.

Few shareholders have difficulty with large bonuses and high pay in return for great performance. They like leaders who make a difference and deserve reward: motivational people who get their people to work smarter and harder together to deliver real added value. What shareholders have never liked is high pay and rewards delivered by lack lustred leaders relentlessly on the personal up escalator with share prices dividends and business performance firmly on the corporate down escalator. They got richer but shareholders did not.

The specious arguments for this were various. Remuneration committees argued there was an international rate for the job a global market with a world shortage of people able to hold down the job of Chief Executive. Disbelieving shareholders were probably just as frustrated vocal and angry then as they are now. The apparent right to vote against Board Room abuses so-called ‘shareholder power’ remained pretty much a notional concept because of the difficulty of gaining information from the company or more importantly the intentions of fellow shareholders. Shored up by an opaque legal framework this gave all the actual voting power to the Board in cosy deals with passive institutional shareholders.

What changed was social networking. Shareholders no longer acquiesced they got organised and become truly powerful. David Cameron came to power saying ‘sunlight is the best disinfectant’ and anger was steadily fuelled amongst investors. ‘Grey panthers’ were riled by negative rates of return from their savings low annuity rates lower share prices cuts in dividend cuts and all linked with a rising retirement age.

Inspired by the power they saw in the Arab spring silver surfers and individual shareholders alike got more connected – more IT literate and more online. If dictators could be overthrown then angry shareholders could acquire the same tools gain a sophisticated grasp of the social networking to link together and make their power felt. Together real shareholder power made it possible for a culture of Board Room excess to be challenged.

Wider changes in behaviour now seem likely. Corporations with large numbers of individual shareholders have been most vulnerable but the dam has been broken. It is easy to see this spreading to more and more corporations: no more complicated opaque formulas for executive pay no more golden hellos before anything has been delivered no more bonuses subsumed into basic pay and the end of golden parachutes for the loss of office.

A new and simple formula seems to be gaining currency anger plus social networking times poor performance and high executive pay equals CEO resignation. Just like the Arab spring the masses have risen up to challenge another ruling elite. This is good for everyone in business more transparency more competition more focus on performance and added value for both shareholders and consumers.