Activist Shareholders Welcomed as Stakeholders (Finally)

Last Updated Aug 20, 2007 6:15 PM EDT

Big pharma company Pfizer announced today that it will hold regular face-to-face meetings with its largest shareholders, setting an important precedent in the post-Enron "sunshine" era of investor relations. As BusinessWeek's Jena McGregor notes in her blog post, Pfizer's move may be a reaction to "2006's fireworks-laden meeting," when shareholders rented a plane to protest then-CEO Hank McKinnell's extravagant compensation package.

Reaction though it may be, the step is big, especially when considered in the context of other recent investor initiatives, such as majority voting, which requires board members to be elected with a majority rather than a plurality of votes , and "say on pay." Aflac pioneered the acceptance of "say on pay" proposals, which allow shareholders the right to make a nonbinding vote on executive compensation packages, and many companies have followed suit. In more recent news, Nelson Peltz used his 5.5 percent stake in Wendy's to convince the fast-food chain to consider a possible sale as part of an overhaul.

The news is encouraging, especially to labor unions and other large shareholders who are gaining unprecedented access to boardrooms, but at the risk of sounding naive, isn't this how it's supposed to work? Shouldn't the people who own the company have a say in how it's run? Blackstone clearly didn't get that memo, since their recent IPO, the sixth-richest in US history, gives investors no real voting rights in how the company does its business.

Greater involvement by shareholders isn't a bad thing, and it can even help companies (note the bump in Dillard's stock price yesterday after Barrington Capital Group asked to meet with the CEO to discuss the department store's declining profits). But as more companies adopt friendlier and more open investor relation policies, will it seem more along the lines of "too many cooks spoil the broth" or "it takes a village to raise a company"?