It’s a leap to see billionaire Carl Icahn as a representative of the common man.
Forbes estimates his net worth at $20.3 billion.
Yet he has been a tireless advocate for investor interests, often against nonresponsive boards.
In an op-ed published by the Wall Street Journal, Icahn asks, somewhat disingenuously, why stockholders don’t have more voting power.
|Shareholders can vote, but boards can just ignore them under the “business judgment rule” backed by state laws and courts. In the middle ages, feudal lords asserted the “divine right” of royalty to justify their lordly positions while plundering the peasants. Today’s boards act like they are vested with similar powers: the divine right of boards!|
He of course gives himself away by complaining about management’s response to a shareholder who acquires 10-15 percent of the stock. That’s not a plaint for the lowly pensioner but for a player who has taken on RJR Nabisco, Time Warner, Yahoo, Lions Gate and so many others.
Nevertheless, Icahn asks some good questions:
- “Is it fair that CEOs make 700 times what the average worker makes, even if the chief executive is doing a terrible job and thousands of workers are laid off?”
- “Why do CEOs get awarded huge bonuses by friendly boards when the share prices are down by double digits and then get their options reset to lower levels as an ‘incentive’?”
He calls for changes in state laws to make shareholder votes count and boards more accountable.
The laws that chafe revolve around the “business judgment rule” which says directors generally have more information than shareholders and are presumed to act in the interests of the corporation. It’s up to their critics to prove otherwise. (Imagine if there were a “government judgment rule” that applied to Congress. The popular vote would be rendered meaningless.)
The business lobby has worked hard to strengthen the rule in the states and to fend off attacks at the federal level. The U.S. Chamber of Commerce, for instance, has opposed shareholder protection legislation on the grounds that it will erode the rule and violate corporations’ First Amendment rights.
As many individual shareholders will recognize, all First Amendment rights are not created equal. The Chamber last year doled out more than $136 million lobbying Washington. How much did you spend?
And what are the odds that the Wall Street Journal will publish your thoughts on corporate governance?
So when Carl Icahn wants to take another public stand for the investor and against complacent directors, we say go for it.