Alyce Lomax of the Motley Fool wrote "Are You a Real Shareholder?" available through Yahoo Finance.
Among the points she raises are, are you a trader in only for short-term gain, are you a "dumb" shareholder who just likes the company for reasons other than long-term growth of your money, or are you a buy-and-hold investor who pays no attention, not even voting your proxies.
All these shareholders permit management to control the company, often against the long-term interests of the shareholders. She calls this management culture.
This is a phrase that I've been looking for for a long time. Many argue that we have free markets and capitalism, but I have long thought that when it comes to large corporations we have neither because it is management that decides many things, irrespective of markets or the shareholders. "Management culture" is a great phrase to define what we really have.
How else do you explain the granting of shares to top management and board members? Is it to align their interests with those of shareholders or is it to line their own pockets? Consider as management and board members grant themselves shares at bargain basement prices, they are diluting the value of shares bought on the open market and diluting the votes of those shareholders. One could say they are taking over the company by stealth.
Lomax suggests "But we can pay attention, and we can ask questions if we see something that doesn't support the long-term success of the company. We can vote our yearly proxy statements, and we can attend shareholder meetings. And if we have to, we can make statements by selling our stock."
My own personal credo is to vote against management if I feel they are paying themselves and the board unfairly, if board members own fewer shares than I do (they often do in some mutual fund companies), or if I feel they are proposing something that is more in their interests than mine.
Whether its politics or corporations, we can have no complaint if we don't vote.
