This is almost worse, because it very explicitly cares only about the short-term price. It's also a much harder problem to solve, because you can't just tell those people "think long-term and ethically when you're exercising your impact on the marketplace!". No matter how ethical they may be as individuals, most of them probably don't even know which companies they have stakes in, much less whether those companies are heading in the right direction!
While they might be implicitly in your first group, attending significant meetings AND ensuring long term growth are primary responsibilities.
There is no short term price in stocks. Stocks are valued at their perceived long term value. If shareholders suspect a company is sacrificing the long term for the short term, they're going to dump the stock until the price of it drops to reflect that.
This also implies that if you can reliably detect that a company is eating its seed corn before everyone else does, you can make a mint shorting it.
Hogwash. Pretty much every company on the S&P 500 dropped 30% around March. Did their perceived long-term value change 30%? I doubt it. I think most people were fully aware that most companies in the S&P's 10 year value wasn't going to change much; certainly not 30%. Yet, it dropped 30%. And then the next month it has risen back up to about 10% of its all-time high. I don't think people seriously thought that Apple, Coca-Cola, Pepsi, etc. suddenly dropped in value 30% and then suddenly rose 20% (yes, I know, technically it was more). If you can have swings of +/- 30% over a period of two months, I don't think the value is reflecting the long-term prospects.
There is both short-term AND long-term pricing in stocks. "In the short-run, the market is a voting machine. In the long-run, the market is a weighing machine." Ben Graham
Price volatility is an indication that either economic conditions are changing rapidly which affects the long term prospects, or that people are very unsure about what the long term prospects are.
It is not an indication that companies are being rewarded for eating their seed corn.
BTW, years ago, I knew a CEO who believed in manipulating the accounts to boost the short term at the expense of the long term. He made the mistake of telling the press he was doing this. The stock immediately tanked.
If the short term pricing theory was correct, the stock would have risen.
Then we have companies like Amazon, who explicitly say they are sacrificing short term profits for long term growth. The result? The stock price has soared to incredible heights.
Double hogwash. That pricing reflected that people suddenly needed cash right now and was irrespective of what anyone thought about long term value. I will bet most of the sellers bitterly regretted it but saw no option but to sell at whatever price they could get because they had urgent immediate needs.
And it shouldn't be. The board has only 24 hours in a day, not remotely enough time to debate every motion from every shareholder.
However, as a shareholder, you can dump your stock, which does send a message when many shareholders do this.
Indeed - but brundolf laments about the lack of shareholders "bothered with [Boeing's] nuances or long-term health" and having only a single one-bit message is not conducive to nuance.
One of the points it makes is that shareholders have very little power in practice, as even if you own a million dollars of Apple shares, that's only 0.00007% of the company. Not exactly enough to force through a motion on your own.
And if you think you'll build up a coalition to get a majority? Good luck doing that when you can't even find out the names of other shareholders.
Minority shareholder lawsuits? They're actually a negligible force; rare, unlikely to succeed, and low impact even when they do.
And that's without getting into 'preference shares' that grant CEOs outsized voting rights.
The book argues management can neglect shareholders' interests with impunity for these reasons.