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Les Greenberg, a semiretired securities lawyer in Culver City, Calif., became a shareholder activist over lunch -- or, more precisely, because of lunch.

Greenberg and his wife grew fond of a bargain entree called the LuAnn Platter while eating for 30 years at the


(LUB) - Get Report

cafeteria chain. Fond enough that when a new management team tried to revamp the chain and sent the stock into a tailspin, Greenberg, with the help of a Yahoo! message board, reached out to other disgruntled Luby's stockholders. With some of their support, he plunged into the rough-and-tumble world of shareholder activism, organizing a low-budget slate of dissident candidates to take on the board of directors at its January 2001 annual meeting.

Greenberg represents a small but growing group of individualshareholder activists who face a host of obstacles to effecting realchange. They are underfunded and don't control much stock, and they generally rely on nonbinding resolutions to make their opinions known. Still, these rabble-rousers carry on, their voices rising in outrage as the list of corporate scandals lengthens. Even if they can't force change, the activists' growing profile has made other shareholders aware that there's an alternative to silent assent.

"We're seeing a sea change in investor attitude in governanceand its importance," said Pat McGurn, vice president and director ofcorporate programs at Institutional Shareholder Services, which advises institutional shareholders on how to vote on proxies. "If nothing else,



Global Crossing

and the rest of them have been a consciousness-raising exercise for investors generally."

Overall, an unprecedented number of shareholder proposals received majority votes in the 2002 season, according to ISS. Some 479 proposals were presented to shareholders through June 14, a 7% increase from the same period last year. Of those, 106 won majority votes -- the highest number ever tracked by ISS. This year, the proposal submitted to the most companies called for submission of shareholders rights plans, or poison pills, to a shareholder vote, which was placed before 60 companies.

Fighting Back

For Greenberg, there was more at stake with Luby's than share price.


Luby's was being raped and pillaged, andwe wanted to save her," Greenberg recalled. The LuAnn Platter, adiscounted combination plate, became the emblem for Greenberg's effort to turn the company around. "We had a real feeling for this organization. It was a tight-knit group, and a lot of people writing on the bulletin board were managers and former officers of the company."

Greenberg had high hopes for his dissident slate of director candidates because it included three retired Luby's executives and also gained support from the daughter of a Luby's co-founder. But the slate ultimately lost the election, in part because the campaign itself forced enough change that the former executives became satisfied and withdrew their support. Still, Greenberg didn't completely lose, given that during the battle, Luby's unpopular CEO abruptly resigned, and the company began making changes. Two well-respected restaurateur brothers later came in as "white knights" and took over management of the company.

Individual shareholder activism has long been viewed as the province of cranks, exemplified most famously by septugenarian activist Evelyn Y. Davis, whose German-inflected grilling has for decades been the bane of CEOs at shareholder meetings. A more formidable threat, John Gilbert, spent 60 years peppering corporate boards with shareholder proposals after convincing the

Securities and Exchange Commission

that there should be rules governing their filing in 1942. He died this year.

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Inside, Outside -- We Just Want an Active Board

John Chevedden, who attended his first shareholder meeting with Gilbert in 1994, also is carrying on the tradition. A former Hughes Aircraft executive in Redondo Beach, Calif., Chevedden sponsored 11 shareholder resolutions that won majority votes in the latest proxy season, according to the Investor Responsibility Research Center. He also coordinates proposals for the Rossi family, a northern California family with wide stock interests that has been involved in shareholder activism for about 30 years.

"This is a full-time occupation for him," Nick Rossi said of Chevedden. "I would say three to four months out of the year, he's putting in 40 hours a week."

The Rewards

Why does he bother?

"The proposals get high votes," Chevedden says. "At least it's a reminder to the companies that the shareholders out there believe they should manage the company better."

The Rossis began their fight for better corporate governance about 30 years ago. That's when father Emil Rossi, now 77, went to an annual meeting of

U.S. Steel

and suggested its directors should own the company's shares. This year, the extended Rossi family, which has amassed a portfolio of stocks in 100 companies, reported winning majority votes on 26 out of 30 proposals submitted, their largest number of wins ever.

But the Rossis' triumphs often are only symbolic, because the resolutions they submit aren't binding. Activists agree that the most effective way of generating change is through a proxy battle that unseats directors. But running one of those is far more difficult, expensive and time-consuming than submitting a shareholder resolution, and is consequently largely off-limits to small shareholders.

Greenberg managed to run a low-budget battle that cost only $15,000, thanks in part to his legal expertise and campaigning via Yahoo. But it's worth remembering that Texas billionaire Sam Wyly spent $10 million on his proxy fight against

Computer Associates

(CA) - Get Report

last year -- and still lost.

The Pros

Professional investors rarely bother with nonbinding resolutions.

Herbert Denton, president of New York-based investment bank and hedge fund Providence Capital, avoids nonbinding shareholder resolutions altogether and instead has focused primarily on proxy battles and binding resolutions, which are avoided by most shareholders because they have not been tested in Delaware courts and therefore are riskier.

"The companies do respond: They just ignore them," Denton said of nonbinding resolutions. For evidence, he pointed to

Navistar International

, which failed to make any change after 83% of shares voted approved a nonbinding resolution calling for a shareholder vote on a poison pill. Within 72 hours after Denton publicly threatened a binding resolution and three-candidate slate, Navistar removed the poison pill.

Denton is no voice in the wilderness, but his track record shows how real activism works. Since 1996, he has submitted 18 alternative slates and placed 33 people on 22 boards of directors. "This is the best fun you can have with your clothes on," Denton said. "You actually get a chance to cause some change. Otherwise you can sit in front of a screen until your eyes fry, and that's not fun."

For Luby's activist Greenberg, once was enough. "It is a humungous, thankless task," Greenberg said, noting that to this day, a company nominates every candidate on its proxy, forcing would-be dissidents to shell out upwards of $250,000 to name their own ballot. "I would rather invest in companies that are well-run and not have to think about doing this."

Instead, Greenberg has broadened his fight and is now asking the SEC for a rule change that would make it easier and cheaper for shareholders to run a dissident slate of director-candidates. "People have written to us and said if they don't get a say who is going to be the watchdog on their behalf, they're just not going to invest anymore," Greenberg said.