1,000 U.S. Firms Rated on How They Treat Investors

A shareholders association chaired by corporate raider T. Boone Pickens Jr. ranked 1,000 U.S. corporations Tuesday based on their treatment of investors as well as their profitability.

The report by the United Shareholders Assn. found that most major American corporations have enacted policies that undermine or deny the “one share, one vote” principle and other forms of shareholder rights.

The group’s rankings, drawing in part from independent data supplied by the Investor Responsibility and Research Center, were based on three factors: the performance of a company’s stock over two years and 10 years, its recognition of shareholder rights and an evaluation of its executives’ financial bonuses and stock ownership.

The Arkansas-based Wal-Mart Stores chain received the group’s top rating, based on its showing as a highly profitable stock, its relatively low benefit packages for key personnel and its responsiveness to shareholders’ concerns.

But the report contended that Wal-Mart and others near the top of its ranking are the exceptions rather than the rule in corporate America.

“Three thousand CEOs are holding 40 million shareholders hostage,” charged Ralph Whitworth, president of the association, which says it represents 60,000 clients.

Whitworth asserted in an interview that chief executives nationwide own only 0.2% of total share holdings “yet have 80% of the voice and no risk,” often protected by guaranteed pension plans and multimillion-dollar salaries padded with bonuses.

The association’s goal, he said, is to spur shareholders to “take an active role in overseeing management of the companies they own.”

The group’s second annual ranking also found that:

* Directors at 441 of the companies approved “golden parachute” agreements for senior executives, providing guaranteed severance packages that the report contends cut into shareholders’ dividends.

* Nearly half have incorporated “poison pill” policies to protect themselves against hostile takeovers through automatic offerings of discounted stock whenever an outside stockholder mounts a bid, thus diluting the value of the raider’s holdings.

* Only 35 allow shareholders to vote their proxy ballots confidentially to elect a company’s directors. Many corporations’ executives, the report contends, abuse non-private corporate elections by trying to manipulate the outcome during the vote.

* Some 496 received their corporate charters in Delaware, the state it said had the weakest shareholder-protection laws.

* About 550 have staggered election terms for directors, guaranteeing that stockholders cannot replace the entire management in a single election.

* Sixty-seven are listed as relying on “unequal voting rights” to suppress minority shareholders’ demands. These include Dow Jones Co., General Motors Corp., MCI Communications, Nike, the New York Times Co., Rockwell International, Times Mirror Co., Turner Broadcasting and the Washington Post Co.

Graef S. Crystal, a UC Berkeley business professor and expert in executive compensation who contributed to the report, cited a failure of the “checks and balances” inherent in corporate structure.

“Executives are doing exactly what Mother Nature programmed them to do,” Crystal said. “They’ve got big, swollen greed glands and they want to get every cent they can. In business, there’s nothing wrong with that.”

Crystal attributed the failure to directors, many of which he said are “clubby with the CEO” and reluctant to enforce the necessary adversarial relationship between management and the board.

The report singled out a few firms for praise, however--notably L.A. Gear, the upstart sportswear manufacturer, which was ranked No. 1 nationally in terms of shareholder rights, though 198th overall.

L.A. Gear has “no provisions shielding management from shareholder accountability, such as a poison pill, golden parachutes or staggered board terms,” the report said.