WASHINGTON — Inspired by their success at Walt Disney Co., activist shareholders have jolted corporate America with a flurry of challenges led by increasingly aggressive institutional investors.
In the most recent uprising, a group of large public pension funds in effect declared war on Safeway Inc., announcing their goal of overhauling the board, getting rid of the chief executive and setting the company on a drastically new course.
The Safeway revolt came just days after Marsh & McLennan Cos. bowed to demands from a group of shareholders that it appoint a new, independent director to help watch over its scandal-ridden Putnam mutual funds subsidiary.
Now the emerging season of annual meetings is expected to bring an unusual number of concessions by management to investors on matters ranging from board independence and election policies to executive pay and splitting up the roles of chairman and chief executive.
Lynn E. Turner, former chief accountant at the Securities and Exchange Commission, compared the wave of activism with a "storm front" that is gusting up against a host of corporate boards.
"And if boards and executives are not responsive to investors when their performance has been lacking, I suspect we're going to see some more lightning strikes," said Turner, managing director at proxy advisory firm Glass, Lewis & Co.
The prospect is leading to about-faces in boardrooms, where directors have traditionally been able to ignore shareholder proposals with little risk. It has also prompted new debate about the agenda of large institutional investors, notably the public employee and union pension funds that are leading the attack on entrenched corporate interests.
Safeway provides a case in point. Public pension funds from California, New York, Illinois and Connecticut said they wanted to overhaul management because of the company's poor financial performance, which has hurt their funds.
"We are capitalists," said New York State Comptroller Alan Hevesi. "We are investors. We are measured as pension fund managers by how well we do in the market."
Safeway officials have contended that the funds targeted their company because of its hard-line labor policies, as seen during the recent strike by grocery workers in Central and Southern California.
Certainly, debates over a fund's motivation may become increasingly common as funds become more assertive in their dealings with corporations.
