Wal-Mart Stores, Inc. (WMT), Facebook Inc (FB): When Shareholders Get Snubbed

Page 2 of 2

Here’s bad form in the governance realm, though: Zuckerberg owns the majority of the company’s shares and possesses an excessive amount of voting power and control through Facebook Inc (NASDAQ:FB)’s dual-class stock structure. For investors who aren’t familiar with the term, this structure basically means that the separate type of stock Zuckerberg owns comes with 10 votes per share for every one vote regular shareholders have.

It’s as if you showed up at the polls to vote for president and realized that some “special” people were allowed 10 votes compared to your one.

It comes as no surprise that, as with Wal-Mart, Facebook Inc (NASDAQ:FB)’s shareholder votes supported management at the meeting — since Zuckerberg basically controls the voting power through his majority.

If you don’t want to answer to shareholders, ask somebody else for money
At companies like Nabors Industries Ltd. (NYSE:NBR), shareholders are ignored despite their majority votes against directors and policies. At companies like Wal-Mart and Facebook Inc (NASDAQ:FB), shareholder votes often don’t matter unless the individuals in control find it in their hearts to listen.

Either way, shareholders should be insulted at how badly and frequently they are snubbed.

There are several ways to go here. Investors who are only out for financial returns should consider selling such stocks, particularly if the company’s financial future looks shaky or has been for a while. Companies that ignore shareholders are more likely to reward their executives for failure, take short-term views, and possibly run their companies into the ground.

That’s what happens when power corrupts, and when shareholders don’t really care that business is deteriorating, management can run roughshod over true business health.

Another way to go is to stand your ground, hold your shares, and vote your proxy ballots every single year. While many investors and Wall Street types believe investors should either like it or lump it, selling their shares if they don’t like how managements and boards conduct  business, there is something to be said for telling managements who feel that way exactly where they can go.

No matter what, it’s time to ask some questions. If corporate governance policies are poor, and corporate managements seemingly don’t care about shareholders’ opinions, why did the companies go public? Asking investors to invest in the business — and become part owners — should mean managements are accountable.

Public companies that sell pieces of themselves in the form of stock, then sell out the owners every chance they get, probably should never have gone public at all. Shareholders should stand up against being snubbed and tell their companies’ boards and managements to shape up. Corporate executives who didn’t really want to deal with shareholders should have thought about raising capital somewhere other than the public market.


The article When Shareholders Get Snubbed originally appeared on Fool.com is written by Alyce Lomax.

Alyce Lomax has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Page 2 of 2