Championing Responsible National Security Policy

If Shareholders Demand Accountability, the Pentagon Will Listen

Shareholder activism is a proven tool to influence corporate giants.

This piece originally appeared on Inkstick.

The first time I ever paid attention to the stock market was in my middle school English class when I was 14. Our teacher thought our curriculum should include financial literacy as well as the usual essay assignments. She was the kind of person whose preppy style suggested wealth and who thought it was necessary to take us all under that wing and show us how to follow the money. And so, it was that in addition to reading “The Hobbit” and mapping out the community in “Z for Zachariah” that I also found myself plotting how my investment portfolio was growing. We received a weekly “check” to buy whatever and as much as we could, and I thought I might have had a knack for the task when my General Electric stocks split 3 for 1.

I am charged, however, to see what shareholders can't track. How does the company assess the financial benefits of having former government officials as board members and executives?

As I suspect is the case for many investors, at that time I was only focused on the stock price. It wasn’t until I joined the Project On Government Oversight (POGO) that I realized that there is a lot of additional information that comprises a company’s financial health. A company’s policies, treatment of workers, integrity, and performance can alter its stock price, and that can place shareholders at odds with executives and the company’s board. How the company decides to spend money and align with policymakers can help or harm investors and shareholders, as clearly demonstrated in the COVID-19 spending debate. As the federal government pushes trillions of dollars out the door for coronavirus relief, there has been increasing public debate about tax dollars that end up going to executive compensation packages and stock buybacks–the priorities of those in charge of these companies are looking increasingly skewed.

That makes it incumbent on shareholders to enhance what I call their “governance literacy.” For example, enhanced reporting to shareholders could shed a larger light on how defense contractors and their trade associations worked to prevent invocation of the Defense Production Act. Shareholders could also make clear that the primary interest for their companies and for the economy is to use relief funds to help their employees, not simply to line executives’ pockets.

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