The Shareholder Forum™

Purpose

The Shareholder Forum provides all decision-makers – from the ultimate owners of capital to the corporate managers who use their capital, and all of the professionals in between – with reliably effective access to the information and views participants consider relevant to their respective responsibilities for the common objective of using capital to produce goods and services.

Having pioneered what became the widespread practice of "corporate access" events over two decades ago, the Forum continues to refine its "Direct Access" practices to assure effective support of marketplace interests.

Access Policies

To provide the required investor access without regulatory constraints, the Forum developed policies and practices allowing it to function as an SEC-defined independent moderator. We also adopted well-established publishing standards to assure essential participant privacy and communication rights.

These carefully defined and thoroughly tested Forum policies are the foundation of our unique marketplace resource for clearly fair access to information and exchanges of views.

History

We have been doing this for more than two decades. The Forum programs were initiated in 1999 by the CFA Society New York (at the time known as the New York Society of Security Analysts) with lead investor and former corporate investment banker Gary Lutin as guest chairman to address the professional interests of the Society’s members.

Independently supported by Mr. Lutin since 2001, the Forum’s public programs – often in collaboration with the CFA Society as well as with other educational institutions such as the Columbia Schools of Business and Journalism, the Yale School of Management and The Conference Board – have achieved wide recognition for their effective definition of both company-specific and marketplace issues, followed by an orderly exchange of the information and views needed to resolve them.

The Forum's ability to convene all key decision-making constituencies and influence leaders has been applied to subjects ranging from corporate control contests to the establishment of consensus marketplace standards for fair disclosure, and has been relied upon by virtually every major U.S. fund manager and the many other investors who have participated in programs that addressed their interests.

Commitment

The Forum welcomes suggestions for its continuing support of fair access to the information needed by both shareholders and corporate managers.

Responding to the recent increases in investor engagement and activism, we have established a strong policy commitment to supporting corporate managers who wish to provide the leadership expected of them by assuring orderly reviews of issues. We will of course also continue to welcome the initiation of company-specific programs by shareholders concerned with the use of their capital to produce goods and services, and we naturally remain committed to addressing general marketplace interests in collaboration with educational institutions and publishers.

Volume 5, Number 2 • February 2008

Who Knows Best?
Here is what you might ask yourself — in a quiet moment of soulful reflection — when an investor questions your strategy.


Back in 1999, when the old AT&T Corp. was a huge operation and growing even more expansive (with cable acquisitions) under then-CEO Mike Armstrong, I asked him this question in an interview for a Directors & Boards cover story: “Can companies grow so large and complex that they could become almost unmanageable?”

That question bothered me then in analyzing AT&T, and bothers me today in analyzing Citigroup and other companies that seem to be unwieldy in size and scope.

Mr. Armstrong gave me a reasoned answer: “Yes, that could become a problem. Not so much due to size, although that is one element of the complexity. It is when companies lose their focus, when they try to be more things than they truly can be, that it is a risk … Manageability is more parallel to focus than it is just to size.”

Fair enough. But still, looking at Citigroup et al, the question nags: Can a company become too big and complex for any one individual to lead — and for a board to oversee? (I’ve been joined in this question by the Wall Street Journal, which critiqued Citigroup in an editorial in January titled “Too Big to Succeed?” — a play on the “too big to fail” philosophy of the domestic banking system regulators.)

Investors who have advocated the breakup of Citigroup over the past few years may have been more right than have the successive CEOs and board members in recognizing the unmanageability — and “ungovernability” — of this behemoth.
 
It’s not heresy to think that investors may actually know more than the board about the company, its industry, and, crucially, its likely destiny. Outsiders haven’t “drunk the Kool Aid.” They are not steeped in the “group think” that comes from seeing the world from inside the corporate walls.

Here from a Reuters report last month on former SEC Chairman Richard Breeden’s activist initiatives:

“Large stockholders … can have vastly more resources to analyze corporate strategies than a part-time board member without an investment staff. ‘I can put eight MBAs on studying a company’s problems,’ said Breeden.”

In a note last month to clients and colleagues, top PR counselor Davia Temin recounts this exchange: “An older corporate board member once said to me, ‘Do you know when we directors know it is time to step down? When the things we believe to be undeniably, incontrovertibly true — aren’t any more.’ ”

If an activist shows up on your doorstep this year, ask yourself: Could this investor be better at seeing around corners for our company and its destiny than we as a management team and board are doing? Are the things we believe about our company, its capabilities, and its place in the universe incontrovertibly true — or maybe not?

And it shouldn’t take an activist knocking on the boardroom door. Take the initiative to get involved in a shareholder forum, like the kind investment banker Gary Lutin organizes and that the SEC is now encouraging, to test your incontrovertible theories about your business.

As a postscript, the circa 1999 AT&T that Mike Armstrong and I talked about was soon thereafter to be no more. It was restructured and acquired. Mr. Armstrong, no longer running the new AT&T but continuing now as then to serve as a board member of Citigroup, is likely confronting the question I asked him nine years ago: “Can companies grow so large and complex that they could become almost unmanageable?”
 

Jim Kristie is the editor and associate publisher of  Directors & Boards.

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Directors & Boards e-Briefing is a monthly service of Directors & Boards. All contents copyright 2008, MLR Holdings LLC.