Carl Olson, who apparently is the Chairman of some outfit called the Fund for Stockowners' Rights (which doesn't seem to even have a website), somehow got access to the Harvard Corporate Governance blog, where he whines about the following Q&A from Edison International's proxy statement:
Q: How may I communicate with the Boards?
A: Shareholders and other interested parties may communicate their concerns, including concerns related to accounting, internal auditing controls, auditing, ethics, fraud, or legal or regulatory compliance matters to any individual Director, including the Lead Director, the Directors as a group, the Audit Committees or any other group of Directors. Such parties may do so by calling the Companies’ independent helpline at 800-877-7089, the toll-free number posted on the Companies’ website, and asking the helpline provider to transmit the communication to the applicable Directors, or by sending the communication in writing addressed to the applicable Directors, in care of the Corporate Secretary at the principal executive office of the Companies. If the communication is delivered via the helpline, it will be forwarded to the Chair of the Audit Committee, who will determine the method of communication to the applicable Directors. If the communication is delivered care of the Corporate Secretary, the Corporate Secretary will review it and will forward complaints and concerns about accounting, internal accounting controls, auditing, ethics, fraud, or legal or regulatory compliance matters to the Chair of the Audit Committee. The Corporate Secretary will forward any other communication that, in the opinion of the Corporate Secretary, deals with the functions of the Boards of Directors or group of Directors to whom it is addressed. The Corporate Secretary will not, however, forward communications unrelated to the functions of the Boards of Directors such as individual customer complaints, mass mailings, new product or service suggestions, resumes and other forms of job inquiries, business solicitations, advertisements or surveys.
Olson complains:
The message is plain: Corporate officers stand between the directors and their constituent stockholders. Direct communication is not encouraged--or, in most cases, permitted--with individual directors.
Wrong. The Q&A is focused on "concerns related to accounting, internal auditing controls, auditing, ethics, fraud, or legal or regulatory compliance matters." As such, it is obviously part of Edison's Sarbanes-Oxley Section 301 compliance efforts. As I explain in The Complete Guide to Sarbanes-Oxley, every public corporation is obliged to set up a program by which such concerns may be reported. And guess to which organ of corporate responsibility such concerns are to be reported? Did you say the audit committee? If so, you're correct.
To be sure, the Q&A isn't limited to such concerns, even though they are its obvious principal emphasis. To that extent, Olson's complaint might seem valid. But it isn't. He opines:
Corporate governance theory states that the directors of corporations represent the interests of stockowners. But in practice directors are prevented from hearing from individual stockowners and their views on corporate matters. Conscientious fulfillment of corporate duties is obviously impaired.
Longstanding corporate policies intentionally erect barriers for avenues of direct communication from stockowners to directors. It’s not easy to contact a corporation’s directors through the corporate offices; they are almost never on the premises, their direct contact information is almost never made available by the corporation, and that information is usually not otherwise public. Individual directors undoubtedly have direct business mailing addresses, telephone numbers, faxes, and e-mail addresses. Directors have no legitimate excuse for not being available for input from the persons they are supposed to represent. Those tens of thousands of dollars in directors’ fees should buy some reasonable access for stockowners.
According to Edison's 2006 Form 10-K, Edison had 54,187 shareholders of record. Of course, the actual number of Edison shareholders will be much larger, since most investors hold their stock not of record but rather as beneficial owners of shares via brokerage and other accounts. According to one estimate, the ratio is 1 record owner for every 4 beneficial owners, which would give Edison roughly a quarter of a million shareholders. Would you be willing to serve as a director of Edison if 250,000 people (not to mention everybody else who had access to the relevant disclosures) had your email address and fax and phone numbers? You'd never get anything done!
In sum, as I explain in The Case for Limited Shareholder Voting Rights, the corporation is not a participative democracy. Indeed, it is not even a republic. Shareholders have only very limited rights, as defined by statute and case law. Being able to fire off an email to a specific director every time you've got some half-baked idea is definitely not one of them.
There are an awful lot of self-appointed investor spokespeople out there these days with an awful lot of dumb ideas. But this one surely takes some sort of prize.