We believe that the time is ripe for the true owners of corporate America to join together to force their direct, legal representatives – corporate directors – to begin once again to act in the best interests of shareholder owners.
Exploding executive pay unrelated to performance, multiplying corporate scandals, failing pension funds, and a stock market that has gone nowhere in eight years have made it obvious that something is desperately wrong. The chorus of critics is growing, most prominently among them Warren Buffett, Jack Bogle and David Swensen.
The math is simple. Over time and after inflation, stocks have risen 6 to 7%. In the last decade management and its entourage have absorbed an ever-expanding share of the value that corporate America generates. Managers and their friends have done well while future retirees, endowments, universities, museums, widows and orphans have broken even – if they are lucky. This is not a coincidence.
About three years ago, a group of Texas investors – concerned that they would have to pay for the problem twice – first as investors and second as taxpayers who would have to foot the bill for failed retirement plans – started talking. The talking spread – to Maine, to New York, to California, to Washington DC. Intense meetings were held where potential solutions were suggested and frequently shot down.
Talk is cheap, and the clock is ticking. All the arguing and all the discussion boils down to this: Shareholders in a united front must cause directors first and foremost to act in the interests of the shareholder owners they are paid and legally bound to serve.
We emphasize that we are investors and capitalists. We prize the driven, egocentric, imperial Chief Executive Officer who builds shareholder value. But we want our representatives – corporate directors – to preserve that value for the shareholders for whom they are the direct, legal representatives.
Frederick E. Rowe, Jr.
President and Trustee