Voting with Our Wallets

At one time, we worried about owning trendy shoes. Today, a growing number of consumers wonder if their fancy footwear was made by a company whose corporate governance is at odds with their own.

In the past, shareholders could vote their displeasure. Yet, at a time when a growing number of publicly-listed companies—especially in high-tech—are opting for a dual-share structure, this option is no longer available. Companies like Snapcaht, Groupon, Google, Zyngoa, GoPro and others tap public markets but retain control of decision-making by issuing voting shares for the Board of Directors but the less desirable non-voting shares for general investors. This leaves the public with very limited voting rights, if any at all. In Snap’s case, all the shares issued were non-voting shares. The “super-voting” shares were retained by corporate board members only.

There are pros and cons to this type of structure. “If it’s done for a good reason, it can be very positive for a company’s growth,” says Michael Dolega, director and senior economist for TD Bank in Toronto. “For instance, in the growing stages of a company, the board may need to keep tight control on how the company is managed or it will be difficult to keep producing the type of growth shareholders expect. Then it can make sense.”

What can the average investor do to have their voices heard? Voting with your wallet—by boycotting certain products or companies—is one recent trend. Dolega notes that such boycotts can work but it depends on the reason why you’re doing it, and what circumstances the boycott is in response to.

A recent example was the consumer boycott of Ivanka Trump’s clothing designs as a protest against Donald Trump, as well as Ivanka’s conflict of interest and unfair advantage. “There can often be a quick backlash but it can have a short-term effect,” says Dolega. Some consumers with opposing political views will double-down and buy more of the controversial product, leading to a wash in the end. Dolega says that the short-term attention span of consumers for these types of activities also plays a part in their effectiveness, or lack thereof.

Other types of boycotts, such as a travel-related, are more likely to work. “In addition to the political reason to avoid a destination or travel in general, there’s also the uncertainty about being stopped at airports and fearing for one’s safety,” says Dolega. “Tourism to the U.S., for instance, is down,” he notes.

“One person is unlikely to swing a company’s balance sheet or a nation’s political views,” says Dolega. “However, if a lot of other people have the same opinions and beliefs, then it could work.”

This is a good reason to get involved with a community to help create positive change. Yes, it requires commitment, but in the long term, your voice will be louder—and much more likely be heard.

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