US AGENCY CHARGED WITH INVESTOR PROTECTION REFUSES TO ALLOW SHAREHOLDERS TO VOTE ON DUAL CLASS UNDERWRITING

Frederick Alexander, CEO of The Shareholder Commons

Across the United States and around the world, political democracy is on the defensive as politicians try to limit their accountability to citizens. The trend is the same in business, as more and more public corporations try to use “multiclass” voting structures to avoid accountability to their own shareholders. Regrettably, the SEC Staff has decided to deny shareholders the right to vote on whether their own companies can continue to facilitate this retrenchment.

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This year, The Sharehoder…

By Frederick Alexander, CEO, Shareholder Commons

Last week, the story broke that private equity sponsor Roark Capital was in talks to purchase Dunkin’ Brands Group, the publicly traded doughnut giant, for more than $9 billion in cash, a 20% premium to its current trading price. The premium works out to almost $1.5 billion, which might look like a home run for investors. The required shareholder vote is thus unlikely to pose a problem.

But perhaps it should.

Do Private Equity Premiums Represent Real Economic Value?

As subscribers to our newsletter know, The Shareholder Commons is encouraging a new lens for investor success: The first question that diversified investors…

On September 28, after more than a year of work, The Shareholder Commons and B Lab released their policy white paper, From Shareholder Primacy to Stakeholder Capitalism: A Policy Agenda for Systems Change.

The paper outlines proposals for changes to corporate and securities law that would end the era of shareholder primacy. We propose:

• giving tools to corporate executives, investment managers, and other fiduciaries to account for their social and environmental impacts; and
• having these fiduciaries take responsibility for their role in maintaining a more just, inclusive, equitable, and prosperous economic system.

With the rules in place, investors could work…

By Frederick Alexander

It’s time for a profusion of op-eds marking the 50th anniversary of Milton Friedman’s famous New York Times Magazine article titled “The Social Responsibility of Business Is to Increase Its Profits.” These reflections will herald corporate executives’ rejection of the idea that companies should focus solely on making money for shareholders. The concept is that the doctrine of shareholder primacy is now supposedly being replaced by “stakeholder capitalism,” which holds that companies should be governed so as to serve the interests of workers, society and the planet, as well as those of shareholders. This celebration is exemplified…

The role of business in society has come under heightened scrutiny these past months. But, in truth, the impact of business on the environment and people — sometimes referred to as “stakeholders” in contrast to a corporation’s shareholders— has been the subject of concern among corporate legal scholars and legislators for much longer.

Recently, I had the privilege to discuss benefit corporations on Evan Epstein’s excellent Boardroom Governance podcast. Benefit corporations are a relatively new form of corporate governance that require directors to consider the impact of business decisions on all stakeholders, not only shareholders. …

By Frederick Alexander and Holly Ensign-Barstow

On June 30, the U.S. Department of Labor proposed a new rule, innocuously titled “Financial Factors in Selecting Plan Investments.” DOL rules are supposed to ensure that the people who administer retirement plans focus solely on securing adequate retirement benefits under their plan.

This new proposal, however, is not really intended to protect workers and retirees; instead, it seems calculated to score political points. The gist of the proposal is to make it more difficult for retirement plans to incorporate environmental, social, and governance (ESG) factors into their investing philosophy. For example, if a…

By Frederick Alexander

A few months ago we noted that even though 182 big companies from the Business Roundtable had signed onto a statement proclaiming that the purpose of the corporation had changed from profit machine to stakeholder value generator, none of those companies had actually changed their legal form. As a result, those companies continue to have obligations only to shareholders, despite the high-minded rhetoric.

As conventional corporations, each of these enterprises must organize its operations in a manner that revolves around optimizing its financial return to shareholders. That is, they can take care of customers, employees and communities…

By Frederick Alexander

The biblical Joseph saved his adopted nation of Egypt by warehousing grain — the biggest industry in the world’s most powerful empire — during good times to prepare for seven lean years. It is a particularly salient lesson given that today’s most powerful country seems almost unable to weather seven lean weeks, with 30+ million hitting the unemployment rolls, 3.4 million new mortgages in arrears, and food shortages predicted.

As Congress scrambles to create help for failing companies, it should follow Joseph’s model and establish a framework for business that effectively accounts for the future. …