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We, your shareholders, demand:

October 13, 2010


This morning I was reading an article in the Chicago Tribune that said three major energy producers (Valero Energy, Tesoro, and Occidental Petroleum) are getting grief from organizers within their shareholders. The shareholder groups, while representing very small segments of the total, are organized and taking the company management to task for spending large sums of cash in political advertising to oppose California’s Proposition 23, which will require cutting industrial and vehicle emissions.

I’ll leave it to others to decide if that’s a good idea or not. My thought for this discussion is about more useful discussions that shareholders could have with company management. These could probably apply to the three companies mentioned, and a whole lot more. Here’s my suggestion:

Dear board of directors of (fill in the blank) corporation:

We the shareholders have invested in this company for the long haul. While we are interested in profits in the short term, we are more concerned with the big picture and are looking out over many years to come. We believe that there is a problematic preoccupation with the short term, and there is too little investment to ensure that we will be able to operate efficiently and profitably in two, five, or ten years.

Our plants are suffering from personnel cuts and an unwillingness to spend money on equipment and automation technology that will put us in a more competitive position in years to come. There is much we can do to improve plant infrastructure in ways that will make them more energy efficient, reduce emissions, increase availability, and boost output. We expect you to improve profits by making appropriate investments rather than simply cutting costs until we fall off a cliff. Our plants should be models of technological excellence with the best trained people in the industry. That is what will build the value of our investment, and we expect you to do it.

Rspectfully,

Your shareholders

OK, maybe this is asking too much, but as we emerge from this recession, it seems like a good time to make such a suggestion. Last December we published an article that discusses what happens when a plant gets caught in the downward spiral of cuts and has to be pulled back before a total crash. Let’s hope that rescue scenario plays out many times in the coming months, with the support of investors. In an interview I had with John Berra, retiring chairman of Emerson Process Management, he told a story about a conversation with a refinery executive that says there are still companies out there that just don’t get it. Maybe the message has to come from a new direction.