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October 28, 2005
Voting with your feet?
What do you do when you own a few shares of a corporation, and you later discover that they are engaged in illegal or unnecessary pollution, strike breaking, or just selling a dangerous or low quality product?
The classic advice your broker would give you is to sell your shares and but the stock of a company that affirms your values. But that same broker, if he is honest and informed in the investment theory of the last few decades, will tell you that the majority of your money should be in mutual funds that index the whole stock market. Sure you could invest in one of the ethical investing index funds, but they have fees that are 10 or 20 times higher than broad market index funds.
So what are all those people desperate to make the world a better place but have a retirement to worry about supposed to do? Is it possible that the growth of index investing is in part causing the growth of activist shareholders? They can't leave, so they have to get angry. A minority of them may actually try to change the culture of the companies they own. They could attend meetings, start proxy battles, and otherwise become activists as they vote the proxies of their investments. Mutual, insurance and pension funds, eager to protect their own reputations, might consider the same issues in how they vote their shares.
Posted by OneEyedMan at October 28, 2005 10:17 AM
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