Investopedia defines accountability as the acceptance of responsibility for honest and ethical conduct towards others.  In the corporate world, a company’s accountability extends to its shareholders, employees, and the wider community.

The question for investors is, what can you do if a company does not meet your standards?  In theory, shareholders, by voting proxies, should be able to influence or remove directors that are not exercising their obligations. 

As a practical matter, many companies have largely insulated their accountability to shareholders through a number of strategies that include staggered elections and shares with unequal voting rights.

Individual shareholders’ options are also limited when fund managers vote shares, held by the fund, without consulting with the beneficial owners of said shares.

So, as a practical matter, what can investors do?  First, recognize that your ability to influence future events is limited.  Second, understand what you’re buying and choose carefully.  Company strategies to reduce shareholder oversight are known and management behavior does not usually change overnight.  If you think you might have made a mistake, sell.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA