In any self-respecting dictatorship, a head of state who got a "no" vote from 43% of the electorate while running unopposed would be on the next plane to Switzerland with all the cash that could be crammed into a suitcase. But corporate democracy doesn't work like that. About 43% of Disney ( DIS) shareholders voted "against" Michael Eisner's re-election to the company's board. Yet he's back on the board and he's still the CEO. The sop that's thrown to dissenting investors? The board decided to separate the chairman and chief executive roles, giving the new job of nonexecutive chairman to director (and former senator) George Mitchell, who himself received "no" votes from 24% of shareholders. In splitting the two jobs, says Eisner, "we heard our shareholders." Shareholder rights. What an oxymoron. If you're not already outraged by the farce at Disney's annual meeting on March 3 in Philadelphia, stew on this: The "success" dissident shareholders had in getting 43% of shareholders to withhold their votes from Eisner could well kill even the limited corporate voting reforms now under consideration at the Securities and Exchange Commission. Corporations were already lobbying hard to kill the almost toothless rule-change proposal; they're now likely to lobby even harder.
Far From Trivial
As the amount of heat that even the proposed rule change demonstrates, this isn't a battle over trivial details. Without meaningful changes in the way corporate elections are run, all the reforms passed so far in an attempt to control executive greed, prevent financial mismanagement and protect investors from financial fraud are likely to fail. The only way to keep the rascals honest is to give shareholders real power to throw them out. That's exactly what we don't have at the moment. Why are investors so powerless? We can use the results of the Disney shareholder revolt to explain.