At corporate annual meetings back in the 1980s and 1990s, there came a point dreaded by CEOs, shareholders in the audience, and not a few business reporters sentenced by their editors to attend (for our sins).
It was the point when the floor was thrown open for comments from individual shareholders — and almost immediately seized by a diminutive woman of a certain age with a flinty, penetrating voice colored by an accent held over from her native Dutch. She invariably introduced herself as “Evelyn Y. Davis, publisher of ‘Highlights and Lowlights of Corporate Annual Meetings’” before launching into a harangue aimed directly at the (invariably male) CEOs and chairmen shifting uneasily in their chairs on stage.
In that era, Evelyn Y. Davis needed no introduction. She made appearances on CNBC and the Larry King program, and on at least one occasion brought the gavel down from the podium of the New York Stock Exchange. She passed away Sunday at the age of 89.
As much as the corporations are afraid of her, I think they enjoy her, because it allows them to marginalize the rest of the stockholder community.
Davis hadn’t been heard from much in recent years, slowed down by age and poor health. Some investors who remembered her from the old days probably thought she had died long ago, an impression reinforced by her decision to erect her own gravestone in a Washington cemetery in 1987. It lists her four divorces, her birth date of Aug. 16, 1929, and identifies her as the publisher of Highlights and Lowlights, 1965-_____.
Davis’ passing gives us an opportunity to reexamine the role of shareholder activists in corporate affairs. One thing is true of Davis and her fellow gadflies: Corporate managements will do almost anything to silence them. In recent years, some corporations have moved to “virtual” instead of in-person annual meetings, a step that Redondo Beach-based activist John Chevedden says is aimed at giving managements more control over the microphone.
Corporate America also has turned its gun sights on proxy advisory firms that counsel pension funds and other institutional investors on how to vote on shareholder resolutions. An Astroturf group misleadingly called the Main Street Investors Coalition — it’s funded by corporations, not the retail investors it purports to represent — has been agitating for the Securities and Exchange Commission to act against the advisory firms.
The coalition’s “advocacy is as fake as its name,” veteran activist Nell Minow wrote recently, adding that it “uses inflammatory language, unsupported assertions, and out-and-out falsehoods to try to discredit the institutional investors who file and support nonbinding shareholder proposals.”
Still, in terms of shareholder gadflies, managements’ handling of Evelyn Y. Davis was in a class by itself. Contemporary accounts tended to describe her as “The C.E.O.’s Worst Nightmare” (Vanity Fair, 2002) or the stockholder activist “they are scared to death of” (Washington Post, 2003).
But if those terms were meant to imply they feared her because she had something on them, they were highly misleading. Managements feared her mostly because she took up their time and could be personally annoying; but they also knew she often could be neutralized by a kind word or an indulgent approach — and also by buying subscriptions to her newsletter, which could be had for about $600 each, minimum two copies, and which was largely devoted to building up the greater glory of Evelyn Y. Davis. They routinely gave her more than the usual three minutes allotted to other shareholders at the microphone, hoping she would eventually talk herself out. (It generally took longer than they expected.)
That doesn’t mean Davis was entirely ineffective. Chevedden, who frequently encountered Davis at General Motors shareholder meetings in the 1990s, recalls that “she asked some pointed questions certainly and got some good votes” on shareholder resolutions. Among her main targets were corporate boards with staggered terms, which diluted shareholder power to alter board makeup; the need to separate the chairman’s and CEO’s jobs in order to enhance oversight of management — which is still an issue in corporate governance; and the need for greater disclosure of the basis for top executive pay.
Some years Davis submitted more than 50 shareholder resolutions to corporate meetings, and by the early 2000s some were garnering significant majorities. In 2003, for instance, her resolution to repeal the staggered board at Federated Department Stores passed with 88.6% of the vote. Like other shareholder resolutions, however, this one was only advisory and couldn’t force the company to pay heed.
Davis’ campaign for more disclosure of the basis of top executive pay — and to expand the executives subject to disclosure — was at least arguably and partially responsible for a 2006 SEC initiative making exactly those changes.
Since Davis’ heyday, shareholder activism has become more institutionalized and, let us say, professional. It’s now more in the hands of big institutions such as CalPERS, the California Public Employees’ Retirement System, but it’s still detested by corporate managements.
He accused this shadowy triumvirate, implausibly, of holding multibillion-dollar corporations “hostage,” causing big companies to be “irreparably harmed,” and acting out of “personal pique.” As Chevedden told me at the time, “This is how companies are held accountable.”
The truth, of course, is that CalPERS and other pension funds, which have helped carry the activist cudgel, have a fiduciary duty to their members, and that’s why they’re interested in better corporate governance.
“Now that investors are pushing back on issues like excessive CEO pay, ineffective boards, and failure to consider climate risk via advisory shareholder proposals,” Minow wrote in June, “corporate executives are trying to kill the messenger. Corporate executives love to talk about the free market until it delivers a response they do not like.”
That was always the way. Evelyn Y. Davis had a manner that grated on CEOs and everyone else who had to sit through her self-congratulatory spiel at the mike. She would lecture CEOs on their weight and comment on the snacks laid out for shareholders. She would make sure everyone knew how to subscribe to “Highlights and Lowlights.” She would, as Minow said, sometimes give shareholder activism a bad name.
But she had her finger on many flaws in corporate governance that persist today, and in some respects are worse than they were when she was at large. The boards at some corporations are lazier and more conflicted than in the past — I’m talking about you, Tesla, and you, Wells Fargo, and you, IBM, and you, Facebook — and their shareholders and other stakeholders are the worse off for that. Anyone who witnessed Evelyn Y. Davis in action might be horrified to hear this, but maybe we need more shareholders like her.