Friday, April 20, 2012

Shareholder Angst

photo by Darrell Sapp/Pittsburgh Post-Gazette
Angry shareholders forced a delay yesterday at the annual meeting of the EQT Corp. as they openly defied CEO David Porges shouting questions at him about executive compensation, the Buffet Rule, and shareholder proposals that management was actively seeking for shareholders to reject, including a limit on Board member tenure from three years to one year.  The EQT Corp. is a 120 year-old energy company that is one of the United States' largest natural gas producers operating in four states and based in Pittsburgh, PA.

From the Pittsburgh Post-Gazette:  "The annual shareholders meeting for EQT Corp. was adjourned for more than an hour this morning after angry shareholders began shouting questions at chief executive officer David Porges about fair executive compensation, the ethics of its board of directors and a proposal to shorten director tenures to one year."

Responding to the angry shareholders' concerns, CEO Porges claimed that EQT's executive compensation packages were "much fairer" than the average "ratio of pay between the nation's CEOs and regular workers."  Further attempting to minimize the shareholder outrage, "Mr. Porges said the disruption was part of a 'broader movement' of anti-corporation sentiment.  'I don't think the unrest had anything to do with EQT proper,' said Mr. Porges.  Their concerns were tied to general industry practices like hydraulic fracturing and a frustration over what they see as outsized compensation and profit at a time when the state is cutting budgets for education and transportation."

Shareholders did succeed in passing a shareholder proposal that management opposed limiting tenures for Board members to just one year.  Rarely do shareholder proposals pass, but this proposal was backed by the Ohio Public Employees Retirement System and shareholders succeeded in passing it over management's objections.

Shareholder anger may be a harbinger of things to come as both institutional investors and nominal shareholders seem to be ratcheting up the disaffect with outsized executive compensation packages and corporations that appear to be working for its executives first and its shareholders later.  Will corporate leadership pay attention?


  1. I think that the Board should start paying attention. If the shareholders have already been able to change one thing about director elections, they may follow it up by changing the election procedure themselves (i.e. that shareholder recommendations must be included in proxy statements). As for the compensation issue, however, I think that the EQT board members will be find because of the presumption that economic compensation decisions are in the purview of the Board. It would be very hard for the shareholders to show waste in a generic employment compensation situation. Board members are usually very intelligent and are usually worth the money (at least that is what the Board can argue). So as for the economic compensation, the Board will only have to sit up and take notice when it becomes apparent that the shareholders are ready to take that next step and implement a new election procedure.

    -Elizabeth LaFayette

  2. "... this proposal was backed by the Ohio Public Employees Retirement System and shareholders succeeded in passing it over management's objections."

    These aren't "shareholder" proposals, this is simply union activism. If the unions want to disrupt the operations of the companies that state retirement funds are invested in for political purposes then they should be required to suffer any resulting loss in the share price of those companies without recourse to the taxpayers. No more "heads we win, tails the taxpayers lose" nonsense. Let them pay the price for their activism.

    The public should demand that unions take complete responsibility for the success or failure of the retirement investments that they control. If their investments lose money, union members should suffer a reduction in their retirement benefits - period.

  3. One might be tempted to classify the shareholder actions as wholly political and not the concern of the corporation. Perhaps a better way to look at it is to acknowledge the overlap between the political and the fiscal. Shareholders, perhaps riding the wave of the likes of the Occupy movement, are demanding lower executive pay, but they might be on to something. There seems to be almost no rhyme or reason about executive pay and corresponding results for the corporation. There are many examples of how it is highly possible to recruit competent leadership with lower price tags attached to it for the shareholders.

    Furthermore, consumer behavior is influence by politics. Corporation execs should be sensitive to the political dispositions of shareholders for that reason. Engaging in behavior detrimental to the environment or another important value can cause adverse financial effects, even more so if the behavior results in a disaster, al la BP Oil Co.

    R. O. Livingood