Divestment / by kevin murray

Public corporations have market capitalizations that are worth billions upon billions of dollars.  One should not underestimate how much power and influence money and the access to money can provide; let alone the influence and the effectiveness of the actual products being provided by the corporations.  The largest corporations in the world are absolutely serious about their money, making more money, growing, influencing, and maintaining their corporate footprint in their particular markets and products of choice.  The stock price is of utmost concern to these organizations from the upper boardrooms to market commentators, to mutual funds and their clients, and to regular people like me and you.


These multi-billion dollar corporations care strongly about their stock price because without ready access to capital, with excessive debt that isn't being service properly, without options or restricted stock that is of value, without the ability to make secondary offerings of their stock, and without the capability to finance or acquire other corporate entities, the stock itself will lag or it will significantly lag the market, which creates a downward spiral in being able to attract new talent and to maintain the current personnel structure within the company. 


Publicly-held corporations can be held accountable by the public at large, by stockholders, by consumers, and the like, if a concerted and focused effort is directed against them.  Even just the threat of a significant mutual fund or endowment or a group of influential stockholders, stating that they will divest themselves of such and such stock, if certain contingencies are not reached or obtained, can put enormous pressure on a corporation to either adjust their behavior, their actions, or to put forth a true answer to the question or questions being asked. 


Divestment is no empty or idle threat, and yes for every seller, there will be a buyer, but if the perception is that this particular stock is controversial, under attack, or under indictment, than buyers will pay less for the stock because of the risk associated with the stock.  Having said this, divestment is an extremely hard game to play, mainly because it takes concentrated power, in which by far the best utilization of that potential power would come from mutual funds or stock brokers as opposed to individual actions by individual stock holders because it is the mutual funds and stock brokers that have the concentrated proxy voting power.


However, mutual funds and major stock brokers seldom rock the boat, or bite the hand that feeds them, which means that even though public companies are accountable to their stockholders and the public at large, they don't really pay them any real mind.  This is a grand disservice to stock holders as a whole, and to any planned divestment movement.  Still, even the hint of divestment, can effect changes, or at least open a conversation between its stockholders and the corporation itself.  In today's world in which information is so quickly and easily transmitted through hi-technology tools, there has never been a better time to use this tool to make change.  The change that so many people yearn for is available to us, but it must be thoroughly thought through, it must be pre-planned, and the effort must be both comprehensive and continual.