WSJ: Small Investor, Bigger Voice

Five ways the Internet is giving individual stakeholders more influence in the boardroom

DECEMBER 3, 2009

By ROB CURRAN

Technology keeps making it easier for the small investor to be heard.

Thanks to the Web, shareholders have not only more information, but more ways to share news, ideas and issues about the companies they invest in. Message boards, blogs and email have all amplified the voice of investors to the point where it's no longer necessary to be a mogul to get the company's ear. Technology, in the form of online shareholder voting, has even thrown open the doors to annual meetings.

Here are five ways the Internet gives small stakeholders a greater voice in the boardroom.

1. Participate in Annual Meetings and Conference Calls.

In May, Intel Corp. became the first major company to allow shareholders on the Web to vote and submit questions as if they were on the floor of the annual meeting. Moreover, a handful of small companies, including furniture seller Herman Miller Inc., have saved money by switching to "virtual" shareholder meetings instead of renting halls (although some critics have questioned the value of sacrificing personal interaction for the sake of increased participation).

Other companies, such as Wal-Mart Stores Inc., beam live video and Twitter updates from their meetings. As of late November, about 40,000 people had watched the video stream of Wal-Mart's June meeting, says Carol Schumacher, vice president for investor relations. Wal-mart says it hasn't allowed remote-participation in its annual meetings so far, saying it lacks the capacity to answer questions from online viewers in addition to those from attendees.

Quarterly earnings calls, a function once reserved for industry insiders, are showing signs of opening up as well. In March, digital-display maker Microvision Inc. began using its corporate blog to solicit questions from retail investors for its quarterly call, in effect opening the call up to any interested party with a computer. Matt Nichols, the director of communications for Microvision, says shareholders that frequented the company's investor-relations blog had asked for a way to participate in the calls.

"As technology improves…the opportunity for participation is there," says Brad Barber, a professor of finance at University of California Davis and the director of the Center for Shareholder Welfare and Corporate Responsibility. "I think what's missing is interest in participation." He adds: "Reducing the cost of participation is part of this, [but there's] also engaging the shareholder to show them they can have influence and power."

2. Don't Just Watch—Vote.

While it's nice to open up annual meetings to more people, it's the votes that count. Starting this year, the Securities and Exchange Commission required publicly traded companies to give investors the option of voting their proxy ballots online. In theory, this could be an easier way of voting than filling out the proxies and returning them in the mail. But online voters still have to punch in codes.

Employees of institutional money manager TFS Capital recently launched a side project, Moxy Vote, an independent venture that intends to mobilize retail investors by simplifying the voting process and providing information on the issues at stake. By visiting Moxy Vote, investors can see where advocates stand on corporate elections and also view a running tally of votes.

There are two ways to use the site for voting. Investors can visit Moxy Vote and punch in the code from the proxy they received in the mail. Or, if an investor registers and provides his or her brokerage account number, Moxy Vote officials say no more codes will be necessary. In this case, the member receives an e-mail notification of a coming ballot from a company in his or her portfolio, then clicks through to moxyvote.com. On the home page, the member will see short explanations of the issues at stake in every coming vote—whether it's a director election or a resolution on energy-efficiency standards.

The member will also see the recommendations of advocacy groups on the site. Once cast, the vote is processed by Moxy Vote partner Broadridge Financial Solutions Inc., which has long tabulated voting for many U.S. companies. The members can align themselves with one of the 14 advocacy groups that have signed up so far.

3. Use the Message Boards, but Be Skeptical.

One of the places where shareholders exchange information most freely is on the message boards, or chat rooms, for publicly traded companies on Web sites such as Yahoo Finance. Postings can include transcripts of revealing conference calls, links to news articles and even legal documents with an impact on a company's earnings.

Be aware that bulletin boards attract persons who are mainly trying to boost or deflate stocks, sometimes by using fraudulent information. Advice on penny stocks, those worth $5 or less, should be taken with an extra pinch of salt.

Users may do well to independently verify information they find on message boards. If a message refers to a damaging SEC filing, try to find that filing on the SEC Web site (sec.gov). If a news article is mentioned, look for the article on the Web site of the news provider. And don't be reluctant to ask questions of the companies themselves.

"The Internet is a wonderful tool for providing information, but the dark side of the Internet is it's a wonderful tool for providing misinformation," says Professor Barber at UC Davis.

One good information source that's not linked to a particular company is Shareowners.org, a nonprofit advocacy group for small shareholders. More than 400 activists regularly post updates on their causes on the site or through links, says the group's chairman, Richard Ferlauto. The site also allows users to petition Congress on financial-reform issues. An issue that's currently hot, Mr. Ferlauto says, is a proposal that would force companies to include dissident board candidates on proxy information sent through the mail. Currently, proxy materials only have to name a company's own candidates for board seats.

4. Keep Up With the Blogs. Or Start One.

Business and financial blogs have multiplied in recent years, providing platforms for shareholder activists, industry insiders and corporate officers alike.

Eric Jackson, a blogger, shareholder activist and managing partner of Naples, Fla.-based Ironfire Capital LLC, conducted an online campaign to reform Yahoo Inc. in 2007, a time when many shareholders were upset about the stock's performance and company business model.

Mr. Jackson, who says he had fewer than 100 Yahoo shares at the time, rallied support by listing "nine points" for Yahoo's improvement on his blog, posting video on YouTube.com, and creating a Facebook page. Eventually he won the public support of roughly 100 shareholders and spoke at the annual meeting, although Yahoo says his points were never part of the official agenda. Still, many shareholders voted against the board at that meeting, and a week later, Chief Executive Terry Semel quit.

Mr. Jackson and his supporters represented a tiny portion of the total votes, and weren't the only shareholders unhappy with the performance of the board—proxy advisory firms also advocated votes of no confidence. Still, Mr. Jackson believes that Internet campaigns like his do have an effect. To be successful, would-be campaigners need to target companies with a high profile and be prepared to invest a lot of sweat equity, he says.

Some corporations, such as Dell Inc., maintain investor-relations blogs, one of the few venues outside press releases where companies discuss financial information—while staying within the bounds of SEC fair-disclosure rules. Unlike press releases, the blog entries also give readers an opportunity to interact with the corporate officers.

Nell Minow is editor and cofounder of the Corporate Library, a nonprofit that campaigns for better corporate governance. The organization uses its blog (www.blog.thecorporatelibrary.com) to help push reforms through Congress and to awaken small shareholders to the dangers of apathy. The government, Ms. Minow wrote in July, should "remove obstacles that currently prevent oversight from those who are best qualified and motivated to manage risk—the shareholders."

5. You Can Always Try Email.

Ms. Schumacher, the Wal-Mart executive, estimates her department receives roughly 100 emails a week from shareholders and tries to answer as many as possible. Investors can try to reach top executives and directors directly as well, even if their email addresses aren't public. Use a search engine to find email addresses of employees at the company. Then use the same convention with the name of the executive. For example, if you see an example such as j.smith@company.net, try to reach the executive using their first initial and last name. Try different combinations until the message doesn't bounce back.

But sometimes old-fashioned ways are best. "When I want to get hold of a CEO, I send a certified letter," says Mr. Barber. "That way, I get something signed to say they got it."

— Mr. Curran is a writer in Texas. He can be reached at reports@wsj.com.

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