Fellow Shareholders, Public Shareholders

It can be stated as a rule with very few exceptions that poor managements are not changed by action of the “public stockholders,” but only by the assertion of control by an individual or compact group. This is happening often enough these days to put the management, including the board of directors, of a typical publicly controlled company on notice that if its operating results and the resulting market price are highly unsatisfactory, it may become the target of a successful take over move. As a consequence, boards of directors have probably become more alive than previously to their fundamental duty to see that their company has a satisfactory top management. Many more changes of presidents have been seen in recent years than formerly.

Not all companies in the unsatisfactory class have benefited from such developments. Also, the change has often occurred after a long period of bad results without remedial action, and has depended on enough disappointed shareholders selling out at low prices to permit the energetic outsiders to acquire a controlling position in the shares. But the idea that public shareholders could really help themselves by supporting moves for improving management and management policies has proved too quixotic to war488 The Intelligent Investor this began to change in 1984, when independent oilman T. Boone Pickens launched a hostile takeover bid for Gulf Oil. Soon, fueled by junk bond financing provided by Drexel Burnham Lambert, “corporate raiders” stalked the landscape of corporate America, scaring long sclerotic companies into a new regimen of efficiency. While many of the companies involved in buyouts and takeovers were ravaged, the rest of American business emerged both leaner (which was good) and meaner (which sometimes was not).rant further space in this article. Those individual shareholders who have enough gumption to make their presence felt at annual meetings-generally a completely futile performance-will not need our counsel on what points to raise with the managements. For others the advice would probably be wasted. Nevertheless, let us close this section with the plea that shareholders consider with an open mind and with careful attention any proxy material sent them by fellow shareholders who want to remedy an obviously unsatisfactory management situation in the company.