Downturn Energizes Activist Investors

Upset by decreasing stock prices, investor groups are promising to hold executives and company directors more accountable at annual meetings this year, which could turn the heat up at companies reeling from the credit crunch, according to the Washington Post.

Activist investors are setting their eyes on a variety of financial services companies including Citigroup and Merrill Lynch, among others. Moreover, shareholder proposals are demanding that major banks better disclose mortgage-related risks, that investment firms on Wall Street offer more transparency on their CEO succession plans, and that credit-rating agencies address potential conflicts of interest that may surface from possibly too-close relationships with the companies that pay them, the Post reports.

One group, CtW Investment, recently asked directors at Bank of America and Washington Mutual to describe in detail what they did to protect shareholdres from the subprime mortgage-losses. The group has promised a strong campaign to urge investors to withhold votes from directors if they don’t explain their actions.

Additionally, a network of shareholder groups, in their anger over multimillion-dollar payouts to financial executives, has strengthened its efforts to rein in CEO compensation. “We have a singular focus on the residential homebuilding crisis, the credit crisis,” Jennifer O’Dell, assistant director of corporate affairs at the Laborers’ International Union of North America, told the Post. “Shareholders are so angry, the public is so angry.  The worlds have aligned. The crisis is so severe that we do have more leverage now.”