Motley Fool: Shareholders make their voices heard

For many years, the financial world just didn’t care about shareholders’ opinions. If you didn’t like your stock’s performance or policies, you supposedly had two options: Sell it, or shut up about it.

Somewhere along the way, everyone seemed to forget that owning shares makes you part owner of a public company. But now, at long last, shareholders are starting to remember that their opinions count.

“Say-on-pay” votes are now mandatory, for example, and reports of shareholders rejecting outrageous CEO pay keep rolling in. Although a minority of companies have had their compensation plans rejected, the pay plans that do get shot down show that shareholders are finally starting to speak their minds.

Shareholders aren’t confining their complaints to compensation, either. A group of investors including the AFL-CIO, the trustee of New York’s largest pension fund, and Trillium Asset Management recently urged Chevron to settle litigation related to alleged environmental damage in Ecuador.

Corporations won’t improve on their own. If your company is pursuing dubious tactics to muzzle your fellow investors, engaging in poor practices, or paying its top executives more than their performance actually merits, don’t suffer in silence, or surrender and sell out. Vote your proxy ballots, call your company’s investor relations department, and raise as much ruckus as you can.

Ask the Fool

Q: I bought a stock near its all-time high. Should I hold on, or sell it? – A.G., West Palm Beach, Fla.

A: The price you paid for the stock is important when you sell it and calculate your gain (or loss) for tax purposes. But most of the time, don’t think about it too much. What really matters is the current price and your estimate of the stock’s true fair price.

For example, imagine you bought shares of Carrier Pigeon Communications (ticker: SQUAWK) for $60 each and they’re now trading for $40 each. If you think the shares are worth $50, you should probably hang on. If you think they’re worth less than $40, selling might be best. Ignore the fact that you’re down $20 per share. If you’d bought the shares for $10 each, you’d be up $30 per share, but your thinking should be the same – hang on if you think more growth is ahead, and sell if you expect the shares to falter.

Never hang on to a stock just in the hope of recouping your losses. You can always try to make your money back in another stock, ideally one in which you have much more confidence.

Q: Which mutual funds pay the most money to shareholders? – D.P., Decatur, Ill.

A: “Income” funds aim to spit out cash regularly by investing mainly in securities that pay interest or dividends. Other kinds of funds (such as “growth” or “value” ones) typically aim to reward shareholders mainly via stock price appreciation.

For recommendations of top-notch, low-fee mutual funds, as well as some model portfolios, take advantage of a free trial of our “Rule Your Retirement” newsletter at www.ruleyourretirement.com.

My dumbest investment

About 12 years ago, I was living in the San Francisco area, where Webvan, the grocery-delivery e-commerce service, was getting a lot of positive buzz (as was everything else that ended in “.com”).

So I gave it a try as a customer and absolutely loved the concept and service. I wrongly believed that a great customer experience correlated with a sound business plan. Then, when the stock started dropping, I saw that as a great opportunity to snap up even more shares. That was a $60,000 lesson. Ouch.

In the years that followed, I’d occasionally see old Webvan delivery vehicles being driven around. Whenever I did, I viewed them as rolling reminders of how not to invest. – R.G., Hudson, Ohio

The Fool responds: Investors in Webvan were excited about its promise, but before it went bankrupt in 2001, it was serving only 10 markets. You might have loved it in San Francisco, but most of the country had yet to experience it. Getting in early can sometimes pay off, but waiting for proven performance and financial stability can also pay off, with less risk.