DLS Consulting

"I Just Want to Throw Away All Those Proxies"

How can I convince you to stop doing this and stopping your clients from doing this? The tendency to believe that your vote doesn’t count permeates not just corporate America but I even hear that sentiment about political elections. Admittedly, my vote alone and your vote alone are not going to make a very big difference unless we are very big shareholders. But think about what our votes together would mean if we were able to focus some of the issues we face in areas of corporate governance today?

In the late 70’s, very little concern was expressed about the issue of stock options for corporate executives. When the bull market of the 80’s and 90’s gave rise to great expectations of shareholders, it was thought that if a major source of compensation for top management came from stock options, then their interests would be aligned with the other shareholders. By this time, we know that just the opposite has happened and we now find numerous cases of backdating options for the convenience and advantage of management over the average shareholder. Do you remember throwing away the proxies that have a vote required for incentive and other stock options? Withholding your vote and writing on the proxy itself that this type of item should be accompanied by a note indicating the cost this provision will cost shareholders.

If all of us demand to know the cost of the options and other provisions being asked for approval on proxies, it will be a step in responsible shareholder activism. Greed when backed up by shareholders who don’t care is a breeding ground for people to reach deeper into the cookie jar. Personally, I have been voting against almost every stock incentive plan that I can because it hurts all existing shareholders and rarely shows that it achieves its intended purpose to make management more aligned with shareholders.

Pray for a great week for the National Association of Christian Financial Consultants, NACFC as we have our annual get together this week in Asheville, N.C. God Bless you all!

Sent July 24, 2006

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