Staff Reporter

When John Chevedden attended a Northrop Grumman Corp. annual meeting a year ago at which shareholders were asked to approve a proposed merger with Lockheed Martin Corp., guards stood next to him as he questioned Chairman Kent Kresa presumably to shut him up if he got out of line.

Things have changed since then. Today, instead of using security guards to intimidate him, Chevedden says Northrop now hires law firms to fight his proposals.

Once merely considered an annoying gadfly, Chevedden is now a force to be reckoned with, becoming the focus of shareholder discontent with corporate management and forcing boards to take his proposals seriously.

"The level of support he has been getting is astonishing," said Nell Minow, a principal with the LENS Group, a Washington, D.C.-based shareholders' activist organization. "His proposals are very carefully thought out and very well worded, and he has become one of the leaders of an emerging movement of individual shareholders who have become actively involved in shareholder meetings."

At Northrop's most recent annual meeting, he presented three proposals to give shareholders more influence over the way the company is run. All three got a majority of the votes very unusual for shareholder-supported proposals, even though none of them are binding because they didn't get the required 80 percent vote.

Northrop officials did not return phone calls seeking comment.

The L.A. aerospace company isn't the only corporate giant to feel pressure from Chevedden. In April, his recommendation for an annual election of directors won 66 percent of the vote at Airborne Freight Corp.'s shareholder meeting. A similar measure he introduced at a Boeing Co. meeting got 49.8 percent of the vote, and has been put on the agenda for the next board meeting, according to a company spokeswoman.

While Chevedden's campaigns have been bearing fruit of late, their true effectiveness is a matter of debate. All his proposals are non-binding, so while many have received a majority vote, none of the affected boards are forced to put them into effect.

"It would seem that these proposals will hold management's feet a little closer to the fire," said Robert Friedman, an analyst with S & P; Equity Group. "But management at Boeing is already fully aware that they are in the hot seat, and they realize what they have to do without these proposals."

Still, they do send a message.

"To have these proposals passed against the advice of the board is an embarrassment for them which they can't ignore," said Minow.

Chevedden is a former administrator at Hughes Electronics Corp. who was laid off in 1992 an experience, he said, that helped shape his views about corporate accountability.

"At Hughes they simply claimed carte blanche, and there was no recourse whatsoever," he said. "Whenever you tried to get an answer, you got vague and evasive responses and nothing of substance. It was a window-dressing style of management."

After his experience at Hughes, Chevedden started reading up on corporate governance and looked for a forum where he could address the issues that irked him most. He was put in touch with John Gilbert, a shareholders' activist who had been a pioneer in corporate governance issues and who took him along to his first shareholders' meetings.

When not attending annual meetings, Chevedden, who lives in Redondo Beach, writes automotive and aerospace books for a living. He focuses mainly on aerospace and automotive companies, but has also become involved with local giants outside those industries, such as Mattel Inc.

"Chevedden is part of a very small group of maybe half a dozen individuals who are not a front for another group, and who introduce quality proposals at more than one company," said Sarah Teslik, executive director of the Council of Institutional Investors.

The influence of shareholder gadflies like Chevedden appears to be growing. So far this year, 35 shareholder proposals have received a majority of the votes cast, as opposed to 32 for all of last year.

"Individual shareholders are the most underrated part of the governance machinery," said Teslik. "They are often dismissed by management and ridiculed, but they instigate many of the issues that are later taken over by institutional investors."

Because he cannot attend all the annual meetings of companies in which he has an interest, Chevedden does a good deal of networking with other individual shareholders and coalitions of shareholders. He cooperates with, among others, the Interface Center on Corporate Responsibility, which sends representatives to shareholders' meetings on the East Coast to present Chevedden's proposals.

In return, Chevedden presents proposals from other activists at local shareholders' meetings. Two of the three Northrop proposals that won majority votes this month were written by other Northrop shareholders.

In addition, Chevedden represents shareholders at companies in which he does not own any stock himself. At the recent Ford Motor Co. annual meeting, he introduced a proposal on behalf of his parents, who are shareholders.

Chevedden focuses on a variety of key concerns. He believes that board members should serve for only one year, and seeks to make boards more independent by removing employees or people with close ties to top managers. He also believes "poison-pill" defenses in the event of hostile takeover attempts should be approved by shareholders, rather than simply imposed by management.

"The proposals he files tend to be pretty mainstream," said Beth Young, shareholder initiatives coordinator with the investment office of the AFL-CIO. "He is very thoughtful in picking issues that are also supported by institutional investors, and he seeks to build a consensus and to avoid marginal or very specialized issues outside of the mainstream."

Meanwhile, Chevedden's reputation is preceding him. A spokesman for Mattel confirmed that the company's president, Ned Mansour, had contacted Chevedden and tried unsuccessfully to persuade him to withdraw a proposal for next month's shareholders' meeting. The proposal calls for 70 percent of the board to be independent.

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