Researching Influential Investors in U.S. Corporations: S.E.C. form 13 and def 14a

SOURCES OF INFLUENCE AND DISSENT WITHIN THE RANKS

Stockholders are a source of considerable influence in a corporation and therefore it is useful for a researcher to identify the main investors. The corporation’s filings with the Securities and Exchange Commission (S.E.C.) will identify the primary investors with the biggest holdings.

Furthermore, S.E.C. filings also identify dissent within the ranks among shareholders. Specifically, you can identify instances of confrontations between the Board of Directors and particular shareholders that are voted on in the annual shareholders’ meeting.

IDENTIFYING THE MOST IMPORTANT INVESTORS

A corporation’s biggest shareholders are listed in the proxy statement DEF 14A, under the title “Certain Beneficial Owners.” Here we have an example form for Exxon Mobil and we see that The Vanguard Group owns 8% of Exxon Mobil’s outstanding stock.

ADDITIONAL MAJOR INVESTORS

The stockholders that have large holdings in a corporation must file S.E.C. Forms 13 D, G, H, or F (click here for more in depth information from the S.E.C.’s guide). One can view a list of the funds that own major holdings and must fill out Form 13F on sites that compile this information like whalewisdom.com. However, these sites often require you to pay for an account to see the major holders that are not funds (such as the holders that file 13D or 13G).

DISSENT WITHIN THE RANKS

Finally, we see where the shareholders have decided to openly take a position against the Board of Directors. The aforementioned DEF 14A “Proxy Statement” includes several items that the board opposes but they have been proposed by shareholders for a vote. The DEF 14A will identify which shareholder proposed the issue and basic background info on the shareholder including how many shares they hold. The form will then include a statement provided by the shareholder explaining their argument in favor of the issue. Note that this is often the only part of this extensive document that is not written by the board and does not praise the board. Next there is a statement by the board telling the shareholders why it urges them to vote against the issue.

In the Exxon Mobile example, we see that Item 6 on the agenda (usually the first 3 items are things proposed by and/or supported by the board, the rest are items opposed by the board) is a proposal for a system that would promote more diversity in the board. The proposal was submitted by the New York City Retirement Systems, which holds over 5 million shares.

The different proposals that are opposed by the board provide an idea for the alternate perspectives among the shareholders that do not always support the board. The shareholders that submitted the “opposition proposals” can also be good sources of information and targets of one’s research.

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