In this episode from Money Rehab with Nicole Lapin, the topics of shareholder activism and investor discontent with Elon Musk are explored. Nell Minow explains how shareholders can influence company policies through proposals, voting, lawsuits, and seeking board positions. She describes far-right groups targeting Berkshire Hathaway with controversial proposals, as well as her vocal opposition to Musk's $58 billion pay package at Tesla.
Minow also discusses the limits of shareholder power compared to leadership control. While shareholders have increased oversight, she criticizes Tesla's board for prioritizing Musk's interests over shareholders. The episode sheds light on shareholder activism mechanisms and how they are shaping corporate governance and practices.
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Shareholder activism allows investors to influence company policies and performance. According to Nell Minow, shareholders can submit proposals, vote against board members, join lawsuits, or run for board positions to drive change aligned with their interests.
Minow reveals Berkshire Hathaway faced extremist proposals from far-right groups disguised as pro-diversity but promoting prejudice. However, savvy shareholders overwhelmingly rejected these discriminatory proposals.
Minow vocally opposed Elon Musk's proposed $58 billion pay package at Tesla, deeming it unjustifiably excessive. She also sold most Tesla shares over concerns about Musk's focus being divided across multiple ventures.
While shareholders can voice concerns through proposals, Minow notes boards are not obligated to act even on unanimously supported proposals.
Minow explains boards have a fiduciary duty to prioritize shareholders over management. However, she critiques the "utterly useless" Tesla board for aligning with Musk's interests.
Over time, previously passive institutional investors have become more engaged in shareholder activism to protect their interests. Their increased oversight has improved board practices and corporate governance.
1-Page Summary
Shareholder activism is a way for investors to influence a company's decisions and policies to protect their interests and improve performance. There are different mechanisms that shareholders can use to initiate change within a company.
Shareholders who are unhappy with company policies have several options at their disposal. They can choose to be proactive rather than selling their stock. Shareholders can write letters to the company, attend the annual meeting to vote against board members, file a shareholder proposal if they own more than $2,000 worth of stock, join a lawsuit, or they may even run for a position on the board themselves. These actions allow shareholders to contribute to the direction and values of the company.
The ultimate goal of shareholder activism is for shareholders to protect their ow ...
Overview of Shareholder Activism and Its Different Mechanisms
Nell Minow discusses how Berkshire Hathaway is facing extremist proposals from far-right activist groups that masquerade as supportive of diversity but actually harbor prejudice. She reveals that three right-wing shareholder proposals targeted the company, suggesting that diversity and inclusion programs are about quotas. However, Minow emphasizes that these initiatives aim to expand the applicant pool and not to impose quotas. In response to these insidious proposals, Minow has voted against them, and notes that savvy Berkshire shareholders have followed suit, as seen with similar proposals at companies like Disney, where one received less than one percent of the vote.
Minow asserts that shareholders have the ability to influence corporate governance by questioning how mutual or index funds vote on proxy issues, including executive compensation plans. She argues that shareholder engagement is key as it leads boards of directors to pay more attention to their concerns when they know their decisions are being observed and possibly contested.
Nicole Lapin introduces Nell Minow’s vocal criticisms of Elon Musk, particularly regarding his pay package. Minow asserts that she opposed Musk's proposal for a $58 billion pay, considering it unjustifiably high. She criticizes the Tesla board as "serial killers of shareholder value" and states that no one, including Musk, deserves such an exorbitant pay package. Minow also implies that such a massive compensation package is not a good investment for shareholders, comparing its return unfavorably to a piggy bank. She voices her belief that Musk’s investment in Tesla already serves as a sufficient motivator and the large pay risk creates imbalance.
Minow criticizes Musk's involvement in multi ...
Shareholder Activism at Major Companies: Berkshire Hathaway, Tesla
Nell Minow discusses the complex dynamics between corporate shareholders and company leadership, expressing concerns about current practices within this framework.
Given the advisory nature of shareholder proposals, Minow points out that a company is not obligated to act on them, even if they receive unanimous support.
Minow highlights the frustration with corporate narratives around shareholder activism. She clarifies that shareholders do not have the power to run the company, contrasting the common mischaracterization that they are attempting to do so.
Minow explains that shareholders have raised significant concerns to leaders like Elon Musk regarding issues like his brother's inclusion on Tesla's board. However, due to his controlling stock share and board influence, Musk can largely ignore these investor inputs.
Directors are legally bound by a duty of care and loyalty, Minow continues, which means they should prioritize shareholders over management. Nevertheless, she criticizes the Tesla board as "utterly useless," implying they are not fulfilling this duty and suggesting a tendency to align with management interests instead.
Over the years, previously passive shareholders have become more active and engaged in company oversight. Minow describes this shift as a response to protect their interests against corporate raiders and insiders' abuses.
Minow discusses how shareholder proposals have led to improvements in director conflict of interest issues and restrictions on serving on multiple boards. She notes that board performa ...
Balance of Power: Shareholders and Leadership
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