Thomas Quaadman, Executive Director for Financial Reporting Policy and Investor Opportunity with the U.S. Chamber of Commerce's Center for Capital Market Competitiveness, has written a column titled: “If It Isn't Broke, Don't Fix It!”arguing that “The recent Navigant Consulting study, released by the U.S. Chamber of Commerce, found no evidence that the 166 shareholder proposals key-voted by the AFL-CIO improved stock prices over the short or long term” and that “evaluating these proposals [for governance reform] we must ask if we are trying to atone for the past sins of the financial services sector, or are we going to shackle the engines that have driven the American economy to unparalleled heights?”
Apparently Mr. Quaadman missed a meeting. It is broke – or should I say, we are. Despite his effort to draw some nonexistent line between Wall Street and the rest of corporate America, the engines he refers to have sunk the American economy to unparalleled lows and critically injured the credibility of our financial markets. The Chamber of Commerce should draw a lesson from Johnson & Johnson’s response to the Tylenol poisonings and devote its efforts to restoring the brand of American capitalism.
Instead, the Chamber of Commerce is once again confusing what is best for American corporations with what is best for American corporate executives, engaging in its usual subversion of public policy with thuggishness, subversion, name-calling, and bait and switch. As announced last month, the Chamber is spending $100 million of shareholders’ money for a “sweeping national advocacy campaign encompassing advertising, education, political activities, new media, and grassroots organizing to defend and advance America’s free enterprise values in the face of rapid government growth and attacks by anti-business activists.” Apparently, anyone who disagrees with them is anti-business. The Wonk Room has an excellent analysis of the propagandistic efforts by the Chamber and their captive outlets. Responsible Investor discusses US SRI firms' response to the Navigant study here.
The best they could do to support this effort was the Navigant study on shareholder proposals cited by Mr. Quaadman, a classic example of a useless and distracting set of data. This highly trumpeted study has no relevance whatsoever to the points the Chamber is trying to use it to support. The study purports to show that shareholder proposals cannot be shown to be predictors or influencers of increases in shareholder value. It poses the wrong questions and manipulates the wrong data. There is nothing in the study about the impact of shareholder resolutions that are filed and then withdrawn following negotiations; therefore the proposals studied are by definition the least effective and management of those companies by definition the least responsive. More important, shareholder proposals and the short-term market returns of a limited time period are no indicator whatsoever of anything relevant to the governance reforms currently at issue. I could argue that what the study does show is that the current system for shareholder proposals limits investors to too narrow a range of subjects and too compromised an exercise of voting rights. But it would give this study and this effort too much credit. It is merely an effort to distract policy-makers and reformers from the issues and at that I trust it will be even less successful, reflecting once again on the Chamber’s methods and priorities rather than on the merits of the issues.
Nell Minow — Editor
