Micromanagement Resolutions

Our Best Practices view:

With one exceptions, described below, we generally do not support shareholder resolutions that amount to management by shareholders, even if such resolutions call for good practices. 

By micromanagement resolutions, we are referring to resolutions related to management practices, strategies, actions or ways of conduct rather than corporate governance.  We expect the management, which is usually paid in the millions of dollars per year, to do their job.  We do not expect to tell them how to do their job.  If they need to be told, they should go.

Micromanagement resolutions frequently call for:

• Product safety policies or reports;
• Workplace safety policies or reports;
• Predatory lending policies or reports;
• General compliance reports or policies;
• Energy efficiency reports or policies;
• Environmental policies;
• High Performance Workplace policy;
• Sweatshop Labor policy;
• Outsourcing policy;
• Adoption of particular business strategies;
• Etcetera, etcetera.

Most of the time, the purpose of the shareholder resolutions, calling for these policies is either the shareholders’ relevant “social responsibility credentials” or the genuine concern that a company should be compliant with any of these basic practices.   However, shareholders should not have to tell the management or the board when to go sit on a potty.  It is the management’s and the board’s job to make sure the company does all of the above. 

Micromanagement resolutions are frequently arbitrary in picking out only one practice.  Management is the art of a million details, and not one or two that happen to catch shareholders’ fancy.  If the management does not know that it should not produce unsafe products, engage in predatory lending or that it must ensure safety of workers, telling them so would do no good anyway.  If the management knows, as it should, telling them this would be gratuitous.

There is one key exception: if the management and/or the board are clearly remiss in their practices. 

For example, the management that allows a safety problem to linger imperils shareholder wealth.  Having failed in its duties, it can no longer be trusted to do the most basic part of its job and should be fired.  Hence, if it comes to supporting micromanagement resolutions, any support for the management and the board should logically be withdrawn.  This would mean withholding votes or voting against most of the incumbent board.  This also means supporting competing proxies and possibly supporting shareholder lawsuits.