Dear Wal-Mart, Shareholders *own* the corporation.

Cite this Article
Elizabeth Nowicki, Dear Wal-Mart, Shareholders *own* the corporation., Truth on the Market (April 05, 2007),

Today’s WSJ had an article titled “Wal-Mart Apologizes to Groups That Were Focus of Surveillance,” which noted that Wal-Mart apologized for responding to large institutional shareholders as “threats.”  Obviously Wal-Mart realized a bit too late that it was absurd, from an investor relations standpoint (and a corporate governance standpoint), to refer to the owners of the corporation as “threats.”

That said, I am not shocked by the reference to large (activist) shareholders as “threats,” and I partially blame corporate lawyers for that perspective.  My view is that, too often, outside counsel forgets that, actually, the corporation is the client, not the CEO/GC who hired outside counsel.  My impression is that often outside counsel tries to “protect” executive officers and the board from large shareholders, as opposed to trying to agitate *for* the shareholders.  Of course, we all know why.  Who hires and fires outside counsel (outside accountants, investment banks, etc.)?  They know where their bread is buttered.  The savvy lawyer/accountant/banker is going to try to keep the person who hired her happy.

Perhaps, then, the solution is to have shareholder ratification of outside counsel….  (Just a random thought that came to me as I typed – no prior thought given.)  Kudos to Wal-Mart for at least recognizing their shareholder relations gaffe.