Game-Changing Investing Moments of 2012


In 2012, corporate governance really began to matter to more and more investors. Shareholders rights and votes didn't just grab some companies' attention, but also grabbed news headlines. In other words, more people started to care.

We've come a long way from the days when corporate governance issues were considered esoteric if not at times downright eccentric. Let's take a look back on 2012's biggest shake-up moments, when public company shareholders took back their ownership spirit and pushed back at corporate managements and boards.

Shareholder votes, shareholder activists
In the years since say-on-pay votes were mandated by the Dodd-Frank Act, we've seen a few shareholder votes against executive pay packages, but they mostly occurred at smaller, lower-profile public companies. However, this past April a mind-blowing vote took place: A majority of Citigroup shareholders voted against CEO Vikram Pandit's pay package.

Speaking of shake-ups, another one occurred in Citi's executive suite later this year: In October, Pandit resigned.

Here's another remarkable moment in 2012. Everybody knows that Wal-Mart shareholders have little voice. After all, the founding Walton family owns about half the company's stock, so right out of the gate we know that independent shareholders don't have a chance of culling a majority vote. However, given that backdrop, a surprising number of shareholders voiced their displeasure with some factors at Wal-Mart, including the international bribery probes coming to light in the last 12 months.

In June, about 13% of shareholders' votes came in against the reelection of current CEO Mike Duke to Wal-Mart's board. In an even more humiliating turn of events, 13% voted against Chairman Robert Walton, who happens to be Sam Walton's son. Major institutional investor CalSTRS had pre-announced its intention to vote against key members of the company's management and board in light of the circumstances.

Several companies' chief executives exhibited a sore response to shareholder criticism of their pay packages: They simply immediately walked. The chief executives of both Aviva and AstraZeneca both resigned after their pay packages were blasted by shareholders.

Carl Icahn is a major fan of shaking up corporate managements and boards, and he's been busy this year. Icahn has taken stakes in major, well-known companies like Netflix and Chesapeake Energy this year.

Chesapeake Energy has long been one of the poster children for really, really bad corporate governance policies, and that situation reached absolute crisis status in 2012. In one heck of a long overdue shakeup, four Chesapeake Energy directors resigned to be replaced with independent directors after Icahn arrived on the scene. The company agreed to implement majority voting, a shareholder-friendly move, and controversial CEO Aubrey McClendon relinquished his role of chairman of the board.

Changing the landscape
On a higher level, shareholders will receive a few other goodies that represented pretty major changes on the landscape of owning shares of public companies in 2012.

For example, the Securities and Exchange Commission finally mandated conflict minerals disclosure, which requires companies to reveal whether their business supply chains support oppressive regimes in war-torn regions like the Democratic Republic of Congo.

In another turn of events that could have lasting repercussions for good or for ill, in 2012 the JOBS Act gave us all a mixed bag to think about. Although it supposedly sought to help companies more easily access capital by going public, it also allows some companies to duck more in-depth disclosure requirements. There's been a good argument that the act will do more to help perpetuate frauds against investors than drum up more jobs for Americans, so investor, beware.

Clearly, 2012 has hardly been dull in the corporate governance realm. The good news is that we investors are stepping closer to an optimum outcome: one in which corporate managements are subject to far more accountability and scrutiny than has previously been the case. This will build better companies and a far more stable pool of stocks to invest in. That's good news for 2013 and beyond.

More expert advice from The Motley Fool
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Check back atFool.comfor more of Alyce Lomax's columns on environmental, social, and governance issues.

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Alyce Lomax has no positions in the stocks mentioned above. The Motley Fool owns shares of Citigroup Inc and Netflix and has the following options: long JAN 2013 $16.00 calls on Chesapeake Energy, long JAN 2014 $20.00 calls on Chesapeake Energy, long JAN 2014 $30.00 calls on Chesapeake Energy, and short JAN 2014 $15.00 puts on Chesapeake Energy. Motley Fool newsletter services recommend Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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