Celebrating Fourth of July Freedoms by Defending Shareholder Rights

Here in the United States, July always begins with a celebration of independence and freedom, when we commemorate the adoption of the Declaration of Independence on July 4^th. A day that set the United States on its path of protecting individual rights to life, liberty and the pursuit of happiness. At Ridge Creek Global, we spent the week after the 4^th in Washington D.C. working to protect our clients’ rights: those as shareholders in publicly traded companies. As part of our work on behalf of clients, we engage in advocacy activities to support those rights gained through investments. This July, that included traveling to D.C. to advocate against legislation aimed at limiting shareholder proposals and decreasing rights of shareholders of public equities.

We were approached by Ceres Inc. early in the second quarter, to ascertain our interest in traveling to D.C. to help oppose legislation that would potentially limit the types, times, and vote threshold for shareholder proposals. As fiduciaries for our clients, we agreed to visit over a dozen offices of members of Congress. We met with Congressional staff members, educating them on the importance of maintaining the current shareholder proposal system. Currently, some members of Congress are attempting to increase restrictions on shareholders because of what they consider “improper activity” by activist investors. This conservation, pushed by large companies who want less shareholder oversight, ignores the fact that shareholders are the owners of the company.

Our advocacy in D.C. included reminding members of Congress that company management works at the discretion of the board, who, in turn, work at the discretion of the shareholders, e.g., the investors of the publicly traded companies. Shareholders, unlike the board and upper company management, only benefit if the stock does well. The board and management, on the other hand, receive salaries on top of the positive performance of a company.

Investing in a public company comes with risk; yet, this risk is partially offset with the shareholders’ right to have a voice. It is the shareholders’ fundamental right to introduce proposals to be voted on by other shareholders. Limiting stockholder proposals limits the rights of the individual shareholders, which is one of the fundamental rights of ownership and key to our capitalist economic system.

One of the key parts of our system in the United States is the ability to have a voice, one of the reasons the Declaration of Independence was signed. Having our voice heard by members of the greatest legislative body in the world is a cornerstone of our economic system. Protecting shareholders’ rights and having conversations with the legislature is part of that voice. 

The conversation about limiting shareholder rights brings about more fundamental questions, which were met with many receptive ears: why should management have a greater say at what a shareholder can bring for a vote? Shouldn’t the other shareholders decide the merit of a shareholder proposal and not management? If a company is operating well, wouldn’t the shareholders support management’s position? We feel that changing the system would create something more akin to a board commissar, who would have the power to determine what they wanted discussed by shareholders, at the expense of shareholders

At Ridge Creek Global, we work to do what is best for our clients, from domestic issues like this concerning voting rights, to sifting through large amounts of global economic data looking for opportunities and trends. Our processes help us pick from a broad range of investments related to global equities, global bonds, commodities, and currencies that are packaged from funds to individual stocks. We are not afraid to publicly advocate for our clients’ shareholder rights. We have no fear of leading from the front on important issues that would impact the investment rights of our clients. At Ridge Creek Global, we are honored to be a steward of your assets and to be an advocate for those assets when others may not speak.