One of the big questions after the Disney vote was whether the uprising against Eisner et al. was a one-time thing or marked a new era of institutional investor activism. We still don't know the answer to that question, but developments at HP suggest that it may be the former:
Hewlett-Packard Co. shareholders re-elected all nine members of the computer maker's board of directors Wednesday, flouting a recommendation by the nation's largest public pension fund. The California Public Employees Retirement System, or CalPERS, last week urged shareholders to withhold votes from five board members who approved Ernst & Young as HP's auditor and tax adviser. CalPERS said the New York-based consulting giant should avoid nonauditing business relationships with HP.
But during HP's annual meeting in Houston, shareholders sided with HP Chairwoman and CEO Carly Fiorina, who said those board members had provided "excellent" advice to senior executives. Eight board members were re-elected by more than 90 percent of shareholders, according to a preliminary ballot count, including four people CalPERS did not support: Lawrence Babbio, Patricia Dunn, George Keyworth and Robert Knowling. Another director, Sanford Litvack, was re-elected with votes from slightly more than 60 percent of shareholders.
I'm an admitted skeptic of institutional investor activism. I think it's an episodic and largely peripheral phenomenon, at least outside the context of takeover fights where the institutions do seem to matter. I also think shareholder activism is bad policy. (See my article Director v. Shareholder Primacy in the Convergence Debate.) My work in this area, however, pre-dates the Disney episode. Over the summer I plan to write a new law review article assessing the state of shareholder activism post-Disney. In the meanwhile, maybe some preliminary thoughts should be my next TCS column. (Update: An alert reader pointed out that director Litvak got dinged badly enough to allow CalPers to nominate an outside candidate if the new shareholder access rule goes through. Good point, but they still only got one out of five.)
