“Corporate managers get the shareholders they deserve.” That old saying has rarely been more important. In today’s corporate proxy battles, when the margin of victory can be slight, managers and shareholders alike are subject to control by thin majorities. That’s why savvy corporate leaders sculpt their shareholder base.
How? One way is via the bully pulpit, to deter shareholders unaligned with corporate philosophy. For example, at a Starbucks SBUX, +2.32%
shareholders meeting, CEO Howard Schultz once told a critic of the company’s hiring practices to sell the stock. In a letter to shareholders of The Washington Post Co., CEO Don Graham once stressed the company’s long-term outlook, adding: “If you are a shareholder and YOU care about our quarterly results, perhaps you should think about selling the stock.”
Besides hectoring to deter, many corporate practices are useful in attracting a certain shareholder base, one that is both patient and focused. This cohort was dubbed by Warren Buffett as “high quality shareholders” (QSs for short). While not rubber-stamps for incumbent directors or strategies, their voting records suggest a focus that makes them more knowledgeable than indexers or proxy advisers, and a patience that makes them more willing than transient shareholders to credit and support long-term thinking.
Evidence shows an association between high densities of QSs in a company and the managerial quest for superior corporate performance. Why? One possibility is that QSs are drawn to companies which boast competitive advantages that boost performance and deflect rivals’ threats. Often referred to as “moats,” these include economies of scale, distribution systems, patents, network effects and brand strength.
Comparing 200 companies common to both lists, one-third of the Morningstar moats are in the top 10% of the QSI ranking, two-thirds are in the top 25%; and the overwhelming majority — almost 90% — are in the top half. In other words, the data confirm widely known anecdotal evidence that moats attract QSs.
Among moats, brand strength appears to be a particular magnet for QSs. There is a strong association between managers regarded as the best stewards of great brands and QSI rankings. For instance, among U.S. managers ranked in the global elite for brand guardianship, a total of 38 executives, all but one are in the top half of the QSI rankings. In short, managers wishing to attract more QSs should invest in brand strength and other moats.
A more intriguing reason why high densities of QSs are associated with corporate outperformance is that the QS cohort is itself a source of competitive advantage, akin to network effects. These arise when a system’s value increases as more people use it. In most cases, network effects represent a tangible benefit to customers, as with fax machines in the old days and social media today.
Similar advantages can arise from a network of QSs. As a group, QSs are more likely than other major shareholder cohorts — such as indexers or transients — to care about the identity of fellow shareholders. This “birds of a feather” effect is visible among the companies held by leading QSs, such as those listed below.
Companies tap into the broader QS ecosystem, where members tend to know one another or know of one another. Resulting network effects reinforce all the advantages of a high-density QS base of patient and knowledgeable shareholders.
The QS cohort may also help brand a company. After all, consumer brands become competitive advantages when they assure that consumers recognize product features. A corporate reputation for attracting QSs is a competitive advantage when a company repeatedly commits to the values patient focused shareholders appreciate, including long-term performance metrics and rational capital allocation policies.
To reach patient and focused individual QSs, many companies cultivate reputations among both consumers and shareholders. Examples include Churchill Downs CHDN, +1.97%
, where shareholders enjoy many racing days throughout the year and enthusiastic support of the Kentucky Derby day; Harley-Davidson HOG, +3.83%
, where shareholders ride their “hogs” in caravans to the annual meeting, and others whose brands and owners focus on particular sustainability commitments, such as Patagonia.
Whatever explains the association between high densities of QSs and corporate outperformance, managers and companies alike benefit from having many QSs on the shareholder list. When ownership of corporate equity is dominated, as it is today, by unfocused indexers and impatient traders, such a cohort of QSs will often be the swing vote in corporate proxy battles. Properly courted and catered to, these loyal shareholders can determine the outcome of elections, as well as the course of corporate prosperity.
I am 32, and just a month ago I found out that my ex-wife, whom I haven’t spoken to since we divorced, passed away tragically in a moped accident. My ex-wife had life insurance through her job. My ex-mother-in-law informed my father that my ex-wife had kept me as her beneficiary on her life-insurance policy, and her family wants the money for funeral costs, bills, etc.
Not only did my ex-wife have me on her policy as the primary (and only) beneficiary, she updated my home address on the policy after we divorced. Also, I found out through the insurance company that my ex-wife had two term life-insurance policies, one for me and one for my ex-sister-in-law.
I blocked my ex-in-laws, and now I received a threatening voicemail from a blocked number, so I’ve taken it upon myself to notify the authorities. I live in New York, I am remarried, and my divorce was very simple and easy. We left the marriage with what we came into it with. The life-insurance company approved the check in my name, and is sending it to my home.
Am I legally in the clear? I have not spoken to or bothered these people once since we divorced five years ago. I just want to be left alone and move on with my life.
Thank you very much in advance.
You can email The Moneyist with any financial and ethical questions related to coronavirus at email@example.com, and follow Quentin Fottrell on Twitter.
Dear Fed Up,
First, I’ll deal with your life insurance concerns, and then the subject of your ex-wife’s funeral expenses.
The life-insurance policy was between your ex-wife and her insurer. It’s possible to overturn a life-insurance policy if it explicitly goes against the terms of a divorce decree, as happened in this case, but that too was a complicated lawsuit. Some states do have statutes that can revoke such beneficiary arrangements.
In “Kaye Melin and Metropolitan Life Insurance,” the children of the deceased were awarded the proceeds from the life-insurance policy, not the ex-wife who was named as beneficiary on the agreement. In that case, the law presumed that what her ex-husband wanted after their divorce was incorrect.
The ruling stated: “Thus, if a person designates a spouse as a life insurance beneficiary and later gets divorced, Minnesota law provides that the beneficiary designation is automatically revoked. At least twenty-eight other states have enacted similar revocation-upon-divorce statutes.”
‘I’m reluctant to say that you are ‘in the clear,’ given previous court rulings, and statutes in some states on the revocation of named beneficiaries post-divorce.’ ”
I’m reluctant to say that you are “in the clear,” given previous court rulings, and statutes in some states on the revocation of named beneficiaries post-divorce. In your case, it seems clearer that your ex-wife wanted you to be the beneficiary. She did, as you say, update your address. It would be hard to see a more explicit sign of her intentions than that.
“Unless the policyholder of the life-insurance plan changes the beneficiary designation officially, the people originally named will remain the beneficiaries through the life of the policy,” according to Heban, Murphree and Lewandowski, a law firm in Toledo, Ohio. “Even if the policyholder was not on speaking terms with the individual upon his or her death, that beneficiary would still receive the income.”
“In the case of someone who divorced and remarried, the policy may name the first spouse as beneficiary. If the policyholder never changed the policy to reflect the divorce and remarriage, the ex-spouse could end up with the benefit. This can cause the current spouse and any children from the second marriage to dispute the beneficiary designation on the policy,” it adds.
But much, I suspect, would depend on what state you live in, and the specifics of your case.
On a separate issue, it’s difficult to glean from your letter whether your in-laws had little funds to pay for the funeral expenses, or were mad as hell that you were listed as beneficiary and felt you should contribute, or both. On the one hand, it seems like they are not in a state of mind to be reasonable and, chances are, if you did engage it would lead to further demands and acrimony.
Perhaps you could talk to your ex-wife’s lawyer and see if there is enough money to cover the costs of her funeral and, if not, you could make a contribution. But given the alleged harassing phone calls, their anger and grief, and their antipathy toward you, you would need to have all correspondence go through the attorney and refrain from any direct communication.
There is no excuse for their taking their grief out on you. Still, spare a thought for her family. If you are fed up, imagine how they feel.
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Wear a mask. Don’t wear a mask. Make one. Buy one. Wear it outdoors. Wear it indoors.
Confused? You’re not alone.
So what’s the deal with the CDC’s new guidance? “Anyone who is fully vaccinated can participate in indoor and outdoor activities, large or small, without wearing a mask or physical distancing,” Dr. Rochelle Walensky, the director of the U.S. Centers for Disease Control and Prevention, said on Thursday. “If you are fully vaccinated, you can start doing the things that you had stopped doing because of the pandemic.”
Vaccines have helped to slow the spread of the coronavirus, and this appears to be a natural next step for Americans tired of masking up. “We have all longed for this moment when we can get back to some sense of normalcy,” Walensky said.
We are still far, far away from normal. You can take off your mask “except where required by federal, state, local, tribal, or territorial laws, rules and regulations, including local business and workplace guidance,” the CDC says. You still need a mask on buses and trains, in museums and most stores, possibly at your place of work, but not inside restaurants, except when you’re going to the rest room.
How do you know a maskless person is vaccinated? It’s an honors system. The CDC guidance gives less reason for people to abide by that old American Express slogan: “Don’t leave home without it.” People are leaving home without their masks, even in states that still require everyone — vaccinated or not — to wear them in outdoor public spaces, including on the streets of New York.
Many people are fed up, it seems. Little wonder: The CDC’s announcement took many health professionals by surprise: According to a New York Times survey, 29% of epidemiologists surveyed thought people would be wearing masks in public spaces for at least aanother year, while 26% said they believed people would do so for another year, and 26% said they thought mask wearing would continue in some form from now on.
‘You still need a mask on buses and trains, in museums and most stores, possibly at your place of work, but not inside restaurants, except when you’re going to the rest room.’ ”
The change in CDC mask guidelines comes just over a year since the CDC said everyone should wear masks. In April 2020, the Trump administration and the CDC reversed their policies on face masks, and said all Americans should wear cloth face coverings and not — as officials previously said — just medical workers. Trump cited “recent studies,” while the CDC cited “new evidence.”
Fast-forward to Thursday. “I think it’s a great milestone, a great day. It’s been made possible by the extraordinary success we’ve had in vaccinating so many Americans so quickly,” a maskless President Joe Biden declared in the White House Rose Garden declared, citing the vaccines from Johnson & Johnson JNJ, +0.15%
Pfizer-BioNTech PFE, -0.20%
and Moderna MRNA, +7.68%.
“It’s going to take a little more time for everyone who wants to get vaccinated to get their shots. So all of us, let’s be patient with one another,” the president said.
Forgive the public for having mask rules fatigue. We’ve been on quite a journey. Studies earlier in the pandemic suggested that adopting the practice of mask wearing, one that was already accepted in many Asian cultures, would have saved tens of thousands of lives. Many Americans were understandably frustrated, but also eager to do anything they could to stop the virus.
Flashback: Dr. Nancy Messonnier, director of the Center for the National Center for Immunization and Respiratory Diseases, said in a briefing on Jan. 30 last year, “The virus is not spreading in the general community. We don’t routinely recommend the use of face masks by the public to prevent respiratory illness. And we certainly are not recommending that at this time for this new virus.”
Three months later, New York Gov. Andrew Cuomo, a Democrat, ordered all New Yorkers to cover their faces in public when they can’t maintain a proper social distance. “You’re walking down the street alone? Great! You’re now at an intersection and there are people at the intersection, and you’re going to be in proximity to other people? Put the mask on.”
‘These are just guidelines from the CDC. It’s up to the states to decide what to do next. New Jersey and New York still maintain their mask guidelines in public spaces.’ ”
The CDC’s latest mask announcement are just guidelines. It’s up to the states to decide what to do next. And that’s a whole other story. New Jersey and New York still maintain their mask guidelines when in public spaces. Gov. Phil Murphy, a Democrat, is examining the guidelines, a spokeswoman for his office said in a statement. Murphy, like many governors, wears a mask in his Twitter profile. Perhaps that tells us all we need to know.
Roughly half of U.S. states have some mask mandate. Alabama, Louisiana, South Carolina, Florida, Mississippi, Nebraska, and Texas, among others, had already removed their statewide mask mandates in public spaces and/or had not instituted one. Florida Gov. Ron DeSantis, a Republican, said Thursday he would grant clemency to gym owners who broke the mask mandate.
Texas Gov. Greg Abbott, a Republican, officially ended his state’s face-mask mandate in March, and allowed businesses to reopen, despite opposition from rival lawmakers and health professionals at the time. Gilberto Hinojosa, chairman of the Texas Democratic Party, described the move as “extraordinarily dangerous” and said it “will kill Texans.”
Cuomo, meanwhile, perhaps still reeling from this time last year when New York was the epicenter of the pandemic in the U.S., was definitive in maintaining current policy. Keep your masks on. “In New York, we have always relied on the facts and the science to guide us throughout the worst of this pandemic and in our successful reopening,” he said in a statement.
‘People take off their masks to make phone calls on the street in states where there is a mandate to wear them in public places, and they take them off while they are sitting outdoors eating.’ ”
Vermont Gov. Phil Scott, a Republican, said his state will follow the CDC guidelines. “Later today, we’ll be updating Vermont’s mask mandate following the CDC’s updated guidance, announced yesterday,” he tweeted Friday. “This will mean those who are fully vaccinated no longer need to wear masks — indoors or outdoors — nor do they need to be concerned with physical distancing.”
In Nevada, Gov. Steve Sisolak, a Democrat, said the state updated its own policies on mask wearing to follow the CDC’s guidelines with immediate effect. Nevada Health Response added: “COVID-19 is still very much a threat in our State and many Nevadans may choose to continue using masks based on their and their families’ personal health concerns. Others should respect this choice.”
That statement, perhaps more than any other, illustrates the tension, fear and frustration not only with state laws and changing guidance, but with each other. People take off their masks to make phone calls on the street in states where there is a mandate to wear them in public places, and they take them off while they are sitting outdoors eating. Most people are doing the best they can.
In California, Gov. Gavin Newsom, a Democrat, said people should still wear masks in public spaces for now, but likely not after June 15 when the state fully reopens. “Only in those massively large settings where people around the world, not just around the country, are convening and where people are mixing in real dense spaces,” Newsom told KTTV.
“Otherwise we’ll make guidance, recommendations, but no mandates and no restrictions in businesses large and small.” Is that all crystal clear? I’ll leave that for you to decide.