Shareholders Savor String of Victories

With the resignations of a succession of high-profile chief executives in recent weeks, the shareholder rights movement has built up a full head of steam. So who’s next?

“I would be surprised if you didn’t see some other heads roll,” said New York City Comptroller Elizabeth Holtzman, a trustee of the city’s $45-billion pension funds. “But we’re not sitting here with a guillotine.”

In the wake of James D. Robinson III’s announcement that he will step down as head of American Express, gleeful shareholder activists Monday were assessing their success at helping to bring about the dramatic changes at the top of corporate America.

After decades of passive investing, pension funds and other big shareholders began agitating against entrenched managements during the takeover battles of the 1980s. More recently, they have put pressure on corporate boards of directors to make poorly performing companies more competitive and profitable.

That kind of intervention is credited with the resignations in recent days of John F. Akers of IBM and Paul E. Lego of Westinghouse Electric Corp. Those, in turn, followed departures late last year of Robert Stempel from General Motors and Kenneth Olsen from Digital Equipment Corp.

Many activists see these as just the beginning.

“If I’m pushing a car and I’m trying to get it out of the mud, I don’t stop pushing,” says Ralph V. Whitworth, president of United Shareholders Assn. in Washington. “Now is the time to really get this thing moving and flush out a lot of what’s ailing corporate America.”

So who should be getting nervous in the corporate suites of America?

“Sears is a natural and has to be feeling some pretty serious pressure,” said Harry DeAngelo, a USC professor who studies corporate governance issues. Sears, Roebuck recently announced plans to lay off 50,000 workers, close more than 100 stores and cease publishing its historic catalogue.

Big shareholders have also taken aim at Champion International Corp., a big paper and wood products company based in Stamford, Conn.

Sears Chief Executive Edward A. Brennan and Champion Chief Executive Andrew C. Sigler both have instituted important, badly needed steps to improve performance, activists noted.

But will corporate America see a domino effect, with anxious directors knocking chief executives off their pedestals without good reason? At least one activist says no.

“You’re not going to see this kind of pace for the rest of 1993,” said Nell Minow, a principal with the Lens fund, a Washington money manager.

“Now might be a good time for everybody . . . to take a breath and think about what has happened so far before the vultures descend on another (chief executive). You don’t want to see the shareholder movement turning into the Queen of Hearts, with a lot of ‘Off with their heads.’ ”

She added that directors should ensure that they can produce a better candidate before they get rid of the current chairman or chief executive.

Much credit for the wave of shareholder activism has gone to the Sacramento-based California Public Employees Retirement System, better known as CalPERS. But CalPERS officials note that it is the directors, not the shareholders, putting pressure on chief executives to quit.

“That’s not really our role, to be going after the ouster of CEOs,” said Dale M. Hanson, CalPERS’ chief executive. “Our focus is just making sure that the directors are providing oversight to management.”

Despite the recent success CalPERS and other institutional investors have had meeting with corporate boards, some companies are still playing hard to get. CalPERS, for instance, has had a hard time scheduling a meeting with IBM’s board, Hanson said.

And Advanced Micro Devices’ chief executive, Jerry Sanders, met only last week with CalPERS officials after repeated tries on CalPERS’ part. Hanson said Sanders agreed to relinquish his position on the executive-compensation and director-nominating committees.

DeAngelo, the USC professor, views performance-oriented shareholder activism as “a very healthy trend” that had its genesis among the much-maligned corporate raiders of the 1980s.

“(They) showed how much value could be generated by agitating,” he said. “The raiders showed what could be done.”

Minow, of the Lens fund, agrees that it is wise to turn up the heat on chief executives to justify their mega-salaries.

“One justification for the large pay is that it’s a high-risk job,” she said. “At last, we (are seeing) it is a high-risk job.”