Allan S.B. Batuhan

Foreign Exchange

IN the 1980’s, the first shots of the shareholder revolution were fired, in the United States and in Europe.

Prior to this, management boards were all-powerful, and were virtually running their organizations like total owners.

Shareholders, who often owned majority of the companies they invested in, were relegated to the role of spectators, watching, sometimes helplessly, as management ran their companies to the ground, or undertook some really bad decisions that jeopardized their investments.

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The rise in the vigilance of shareholders about the well-being of the companies they were invested in came at just the right time, as the companies they owned began to fail, one after the other, through a series of errors and ill-timed decisions.

The 1980s was the time when the Maxwell pension scandal broke out in the United Kingdom. Robert Maxwell, the larger-than-life media mogul who ruled over Britain’s tabloid press at the time, was caught fiddling with his company’s pension plan. Money that was supposed to go to widows, orphans and senior citizens was funneled to fund the man’s frivolous ways, and many of his retired workers ended up broke and penniless.

In the United States at the same time, corporate wrongdoing were a dime a dozen. This era was dominated by “greed” and “excess,” epitomized by Michael Douglas’ character in the movie “Wall Street.” The ‘80s was marked by takeovers, mergers and acquisitions that seemed to make no business sense, culminating in the famous RJR Nabisco saga, which led to the ultimate collapse of the mergers and acquisitions bubble in the United States.

Shareholder and investor activism, to a large degree, helped to tame corporations into doing the right things.

In Britain, their actions led to widespread pension reform, which ushered in the era of safe and reliable pension fund management in that country. In America, shareholders ousted a larger number of chairmen, chief executives and other senior managers, helping to instill prudence and common sense once more in corporate affairs. Without those drastic actions, life in corporate Europe and America would have turned out very differently indeed.

But what about in politics? What redress do voters have against incompetent and unfit officials, who happen to have been voted into power on the strength of false expectations? Is there such a thing as a shareholder revolt in political terms?

Yes there is, and in the Philippines we have tried it at least a couple of times already. In fact, we have names for them —Edsa 1 and Edsa 2, with numerous other mini-uprisings in between.

Problem is, we cannot have too many of them.

Coup d’etats are, in actual fact, illegal and against democratic principles. OK, Edsa 1 was wholly justified, even as Edsa 2 was much less so. But unlike shareholder revolts, which mostly strengthen the organizations where they take place, forced expulsion of democratically elected leaders is bad news for business. While investors may like to undertake their own revolts, they are mostly not too pleased when these revolts take place in the countries where they are in.

Which leaves us, the electorate, with only one choice this coming May. Since we cannot change our board of directors in mid-term, we need to make sure that those we elect are already the right ones to begin with.

Unlike in business, in politics, it is “no-return, no-exchange.”

(http://asbb-foreignexchange.blogspot.com & http://twitter.com/asbbatuhan)