Biz Orgs Prof.

Yuille

E-Portfolio 9
Shareholder Activism & Consumerism

Reflect on the role of shareholders as activists and as consumers and the task you completed in E-
Portfolio 8.

What are the benefits of the existing rules governing shareholder participation in corporate
management? What are the limitations? What are the risks?
How do activist or consumerist shareholders contribute? (i.e. Do they mitigate, amplify,
neutralize these consideration? Are the relevant?)
Does the existence of shareholder activism change your perception of what the purpose of
corporate law is or should be?
Does the role of the shareholder make business more or less accessible to groups that have
been --based on the empirical evidence--historically excluded from corporate engagement (i.e.
women, people of color, poor people)?

You do not need to respond to each of the prompts above, but you should reflect thoughtfully.
Post your initial reflection by Wednesday, Oct. 25. Then visit at least 2 students e-portfolios 8
& 9 (one student from each other firm) and revise your response based on the reflections they
have made. Post your revisions by Friday, Oct. 27.

The existing rules allow enough participation so that the shareholders can reasonably exercise
their rights as owners in having their voice heard in regard to the direction and activities of the
corporation. These rights were limited, as the average shareholder does not have the business expertise
and the level of understanding required to successfully manage and run a corporation on their own.
This is why as a default, corporations have these fundamental differences from sole proprietorships or
general partnerships. The current rules were carefully created as to allow participation, but not control.
The risks of removing these rules and giving more control to shareholders would mean that
shareholders would be able to exercise the kind of control that a typical owner of a non-incorporated
business would. This would surely lead to poor business practices and the failure of many corporations.

Consumerist and activist shareholders in a way amplify these risk as they as the owners and
consumers can still govern the ultimate success or failure or a corporation. The corporation has to bend
to the will of the activist shareholder because when they are unhappy they can affect public perception,
which in turn has an effect on consumers. A corporation with no consumers has zero chance for
success.

When looking at demographics, the role of the shareholder is still dominated by the groups of
people who dominate the rest of the business world. To have any real influence on a corporation, a
significant number of shares must be owned. Even for a shareholder that only buys lesser amounts of
stock as a method of investment, the door to the role of the shareholder is equally closed for groups
that are traditionally considered to be at a disadvantage. Think about it, to be able to invest and
become a shareholder one must have capital to contribute in return for stock. If money is being used
for living purposes, someone isnt going to take money out of an already tight budget to buy an
essentially useless share of stock. For these groups money in hand now is more useful than an
Biz Orgs Prof. Yuille

investment that may or may not grow over time. To address the issue of participation in the corporate
market we must first as a nation address the socioeconomic barriers in our society.

After looking at some of my classmates reflections it seems that I took a slightly different
approach in my analysis. For example, while I looked at the risks of overly activist shareholders, others
looked at the risks of there not being enough activism that has meaningful results that can lead to
reckless corporate practices. This made me take a step back and see that some of my positions were
very pro-corporation. Maybe the current system has rules in place that allow too much free reign in
the corporate world, with not enough accountability to the shareholders.

Looking at the question of accessibility some classmates also went the extra step in identifying
the big picture effects of shareholding still not being accessible to disadvantaged groups. I found this to
be particularly interesting as it was something I had not considered. For instance, if disadvantaged
groups typically dont hold enough stock (if any) to have any real voting power, then they will have no
voting power. It is nave to say that racism and stereotypes do not exist in America today. This provides
a meaningful explanation as to why most BODs are dominated by older white males. If a class doesnt
have accessibility to shares and have no voting power, then there little chance that they will be
represented on a BOD.