For investors, most annual meetings are anything but a hot ticket. They're typically held in small auditoriums and feature an agenda that makes C-Span look like an action thriller. Then there's Wal-Mart, the Arkansas-based retailer whose shareholder meetings are celebrity-packed, high-wattage showcases. Last year's gathering featured the comedian Sinbad and musical numbers by Jennifer Lopez and the cast of "High School Musical." But amid these surprise performances, the most unexpected moment came when shareholder activists were each given three minutes at the podium. Most offered run-of-the-mill liberal criticisms that hit every large company: a Roman Catholic nun urged Wal-Mart to support universal health insurance; several speakers suggested the company rein in executives' huge paychecks. But from the other end of the spectrum came Peter Flaherty, lambasting Wal-Mart for being too nice to unions, too concerned about the environment and too accommodating to gays and lesbians. "People shop at Wal-Mart because of low prices, not because the company is politically correct," Flaherty shouted at the crowd. (Article continued below...)
Come again? With its deep roots in Red State America and a reputation for upholding "family values," Wal-Mart seems an unlikely target for conservative criticism. It's the company that banned sales of CDs with offensive lyrics, refused to stock racy magazines like Maxim and declined (until 2006) to sell the Plan B emergency contraceptive pill. But in recent years, as it faced growing pressure from liberal activists, Wal-Mart has begun to make changes. It began offering more-robust health-insurance coverage to workers. Its CEO voiced support for raising the minimum wage. It has launched an ambitious environmental program. As a result, while Wal-Mart continues to face criticism from liberal groups, it's now simultaneously being criticized by some conservatives, who say the company's concessions to liberals are hurting its business. "This is kind of a guerrilla fight," says Flaherty, who heads a tiny right-wing think tank called the National Legal and Policy Center (NLPC), which holds just a few thousand dollars in Wal-Mart stock.
Shareholder activism has been around since the 1940s, when the SEC first began letting investors file resolutions. At first, most shareholders focused on bottom-line issues, but in the late 1960s, Vietnam War protesters began filing resolutions against companies that provided materials (including napalm) for the war. By the 1980s, activists had become a fixture at annual meetings, speaking out on issues like companies' investments in South Africa or the use of sweatshop labor. While conservative pro-life groups have occasionally filed proxy resolutions, says researcher Beth Young of the Corporate Library, shareholder activism has been dominated by liberal interests.
Now that's changing. Flaherty, a former grass-roots organizer for Ronald Reagan, argues that conservatives have been slow to recognize that today it's corporations, not government, that drive many big social changes. That's been true recently on issues like gay rights, health-care costs and the environment. So since 2006, Flaherty and the five-person staff at NLPC have been filing proposals and attending annual meetings. So far this spring, they've spoken at the shareholder meetings of General Electric, Boeing and Anheuser-Busch; next week they're at United Airlines. And they're not alone: the right-leaning Free Enterprise Action Fund (FEAF), a tiny libertarian mutual fund, filed resolutions with 20 companies this spring, including Wal-Mart. Most of the FEAF resolutions argue that companies should be more skeptical and resistant as environmentalists push them to reduce their carbon footprint. Some investors apparently agree: at last week's ExxonMobil meeting, where a group of Rockefeller heirs unsuccessfully urged the company to broaden its focus on renewable energy, a speech by FEAF manager Steve Milloy received loud applause.
Environmental issues are at the heart of Flaherty's complaints about Wal-Mart, too. In a 46-page report the NLPC will release this month, staffer John Carlisle writes that Wal-Mart customers aren't buying many of the organic products it's begun stocking; that the energy-efficient compact fluorescent light bulbs it's been touting aren't really good for the environment (because they contain mercury), and that its support for legislation to cap carbon emissions will only hurt consumers and its bottom line. (Wal-Mart responds that its environmental initiatives "are not only good for the environment—they are good for our business, too.") The NLPC says Wal-Mart is naive to think incremental compromises will ever really placate liberal critics. "The more Wal-Mart tries to appease the Left, the more the Left demands," the report concludes.
While most corporations look on them as gadflies, shareholder activists occasionally do bring about change. Many U.S. companies divested South African holdings under pressure in the 1980s, for instance. But most shareholder resolutions garner very few votes, and Flaherty's group is getting limited traction so far; its resolution against Wal-Mart didn't get enough votes last year, so it lost its spot on the agenda at Wal-Mart's 2008 meeting, which takes place this week. Some observers think political discussions don't belong at annual meetings in the first place. "The corporate ballot box is not the best place to have debates on broader social topics," says Charles Elson, a University of Delaware governance expert. But as long as businesses grapple with fast-rising health-care costs, the growing concern over the environment and other hot-button political issues, corporate meetings will likely see more strange bedfellows indeed.