An investor that wants to give a BoD a piece of their mind has only a few choices: write a letter, ask to meet, or vote against them at the next annual meeting. All sorts of new ideas for engaging shareholders have emerged recently, none of them compelling. A new company now gives shareholders another option.

Called iiWisdom, it began its work this month after a couple of years’ of planning. It seeks to compile a database of investor sentiment about major US companies, and send a report on that sentiment to interested BoDs. The database will consist of shareholder responses to a voluntary questionnaire.

The Wall Street Journal reported on them last week, so you may have seen that earlier account. Here, we summarize the idea, suggests some improvements, and encourage investors to participate.

Companies: Right now, iiWisdom collects data on fifty of the biggest US corporations, such as Apple and Walmart. They plan to expand the companies covered as interest in the idea picks up. Eventually they could cover the S&P 500, and beyond.

Survey subjects: Investors in the companies that iiWisdom covers. Participation is voluntary and free of cost. The more shareholders that participate, the better the statistics become on a given company, and the comparisons among companies.

Questionnaire: iiWisdom has a sensibly short questionnaire, with four satisfaction-type questions on investor sentiment about the BoD, and one on exec comp. There’s plenty of room for additional comments.

Report: A sample report features analysis of the responses. It includes peer company comparisons and edited comments from investors. Right now iiWisdom plans to give these reports to companies for free. Eventually they will sell these reports, and advanced analyses, to companies and others. Activist investors will find these especially useful, relative to corp gov ratings or other measures of corp gov quality.

Areas for Improvement

Of course, iiWisdom should cover more than the 50 largest companies, and they know it. These first 50 serve as a test, and need enough investors that they can compile a credible sample of investor sentiment. They can thus refine and improve the questionnaire, analyses, and reports.

And, iiWisdom should expand the scope of the questions, and cover more fundamental business subjects (they know this, too). Rather than just weighing in on the quality of the BoD, investors will also want to opine on the cash position, balance sheet, operations, and expenses, among many other subjects. The current questionnaire does cover overall corporate strategy, yet shareholders have valuable input on other subjects, too. Of course, a longer questionnaire discourages participation, so iiWisdom will need to consider that dilemma, and balance sample size with the size and detail of the database.

One Soft Spot

Investors participate only if they wish. They pay nothing to complete a questionnaire, and receive nothing for their opinions (right now anyone can see at least a summary of the results). This can lead to a couple of potential problems:

1. ❖Only those shareholders that have a problem with the current BoD will join in. This can bias the results to look more negative than they really are.
   

2. ❖Shareholders might not take the questionnaire seriously. Similar to the vote on a precatory shareholder proposal, we don’t know if CEOs will use the results, or even take the time to read them.
   

Valeant and Pershing Square encountered this same problem with the vote at their proposed “get together” at Allergan. Valeant and Pershing Square decided to skip that get together, although as of right now they still plan to seek a vote on the non-binding resolution they intended to present at that earlier meeting.

We hope that iiWisdom succeeds in eliciting candid feedback from a wide range of investors, and that companies and shareholders alike value the process. It has substantial promise, and we encourage investors to participate.