Page 172 - Business Principles and Management

C HAPTER 6 A SSESSMENT

CASE 6-2: Stockholder Responsbility
Alicia Fuentes owns 15 shares of stock in the Shale Oil Company, a large
corporation that deals with oil and gas products. Hugh Jones, a friend of
Alicia’s, owns 20 shares. Today they both received an invitation to attend
the annual stockholders’ meeting in Chicago, which neither can attend.
They had this conversation over dinner at a local restaurant.
Alicia: Since I can’t attend the meeting, I’m going to sign the proxy card
and answer “for” regarding the two proposals that are to be voted
on. Of course, I don’t know any of the board members who are
up for election, but they must be OK. I wish they could distribute
more dividends, though.
Hugh: You shouldn’t just give your vote away to management, Alicia.
You should elect one of the candidates to be an outside board
member. That person could then shake things up a bit, get some
changes made. You probably also don’t know anything about the
other item asking for approval to increase the number of shares
of stock that can be sold.
Alicia: I don’t have time to do homework on the company. Shale Oil
Company always makes a profit; therefore, it deserves my vote.
Hugh: Too many stockholders don’t do their homework on the com-
pany and not many go to the meetings. So management always
has its own way. Why bother sending a proxy statement at all?
I’m not going to waste time sending my proxy back.
Alicia: I’m still going to vote, Hugh. Besides, the company pays the
postage.
Hugh: You’re doing what everyone else does. Management always wins.
But since you’re going to vote, I will too. The difference is that I’m
going to vote against the two items . . . no, on second thought, I’ll
just sign the proxy. That will really confuse them.

THINK CRITICALLY
1. Whether they vote “for” or “against” the proposals listed on the
proxy statement, how many votes can Alicia and Hugh cast?
2. If the proxy statement is like the one shown in Figure 6-6 and Hugh
signs it but does not mark “for” or “against” the two proposals, how
do you think the management will use the proxy?
3. If Hugh or Alicia wanted an important proposal to be made known
and voted on by the stockholders, how could they achieve their goal?
4. How should Alicia and Hugh have received information about each
of the proposals from management that would enable them to vote
with adequate information?
5. What might an outside board member do that an inside member
might not do?
6. Why do Alicia and Hugh need to worry about who is on the board
at Shale Oil Company?

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