Monday, July 23, 2007

IR Web Report: Shareholder wiki warrior Eric Jackson is back

By Dominic Jones

ERIC Jackson, the individual shareholder and management consultant who launched an annual meeting campaign against Yahoo! with a wiki, a blog, YouTube and a lot of media interest, has turned his sights on a new target — struggling Motorola, Inc. (NYSE: MOT).

As reported by the Wall Street Journal’s Deal Journal, Jackson on Monday afternoon launched another of his trademark “Plan B” online campaigns, this time calling for the immediate ouster of Motorola CEO and Chairman Ed Zander and four other board members.

Jackson, who owns just 130 shares of Motorola stock, announced the campaign on his blog, posted videos on YouTube and put up a Motorola Plan B wiki, a website where people can contribute and edit the alternative plan for the company.

Most important, though, Jackson is asking Motorola shareholders to pledge their shares behind Plan B on, a website where people can organize petitions and campaigns. As I write this, 55 shareholders have pledged 329,503 shares behind Plan B for Motorola.

In less than a week, Jackson has 55 pledges totaling 329,503 Motorola shares.
Phase 2 of Web’s democratization of capital markets

I’ve always believed that the Web would be a democratizing force in the capital markets and that companies would need to understand the medium if they hoped to have a clear and relevant voice in the discussion.

It started in the 90’s with online brokerages changing the brokerage business with low commissions. Suddenly, anyone could buy stock without having to go through a full-service broker. That attracted a lot of younger and more independent-minded people who otherwise might not have invested in stocks.

The next phase of the Internet, what people refer to as Web 2.0, is allowing these same independent minded individuals to organize themselves into online communities. And these online communities are made up of people who are more technologically astute and more activist in nature.

A recent study by USC-Annenberg School Center for the Digital Future found that 44% of online community members participate more in social activism since they started participating in online communities.

Roger Ehrenberg, a former Wall Streeter who got Web religion, says he can see something big happening. In a post entitled A New Kind of Shareholder Activist: The Internet-Powered Retail Investor, he writes:

Now I’m not trying to make a mountain out of a molehill, but the Internet is a place where viral ideas can spread - and spread quickly. And as virtual communities become increasingly de rigeur and people are able to efficiently leverage their own networks, it is not hard to see scenario where a meaningful number of shares could be pledged to back a spokesperson championing the cause of the retail investor. The IR outreach stakes have just been raised; it isn’t just golf with Fidelity, Janus, Wellington and Capital Research any more. You’ve now got those pesky, Internet-savvy retail investors to deal with as well. And they want answers, accountability and results. NOW.

Making fund managers blink is road to retail power

My view, which I shared with Jackson when he started his Yahoo! campaign, is that the true path to retail investor power lies not in the hands of the 10% or so of retail investors who own stock directly in online brokerage accounts, but in the hands of those millions of ordinary people who invest in mutual funds.

If you really want to effect change, you need to get to the soccer moms and dads who are invested in the mutual funds that are the biggest owners of Motorola stock. You need to make Plan B resonate with them like that recent campaign that made Fidelity blink.

When mom and pop start writing letters to their fund managers demanding that they pledge their MOT shares behind Plan B, that’s when you start changing the world.

Two guys who got this and did it exceptionally well were Roy Disney and Stanley Gold back in 2004. The Save Disney Campaign and website are long gone, but I have the story and screenshots here. That was the true beginning of shareholder campaigns on the Web.
Against all odds, these two guys changed the rules of the game, in part by getting mutual fund investors to petition their fund managers.

When your salary or earnings are based on the amount of assets you have under administration, the threat of people moving their money out of your fund because you’re not activist enough is like a kick in the stomach to a fund manager. You’ll get their attention because you’re making it personal. You’re talking bonuses, and private schools, and vacations in the south of France.
Disney and Gold got that — and they used it to bring down someone who was thought untouchable, former CEO Michael Eisner.

Not reaching the soccer moms and dads — yet

Eric Jackson’s campaign against Yahoo! and now Motorola are doing similar things to what Save Disney did three years ago. But to date he’s mostly targeted technology companies and used tools that work with tech-savvy web users.

Wiki’s and blogs are not mainstream to the extent that they’re likely to inspire action from mainstream mutual fund investors or shareholders in old economy companies. To reach that audience, you need money and a team.

Still, what Jackson has been able to achieve without money and a team is remarkable. I have enormous respect and admiration for him. He’s a gutsy go-getter who is making a difference.

But until pledging your shares or emailing your fund manager is as easy as buying stock through Schwab, most CEOs and mutual fund managers probably can keep the yacht in Saint-Tropez.

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