Monday, February 12, 2007

GE Proxy High Jacked

General Electric (NYSE:GE) finds itself in the peculiar circumstance of not being sufficiently capitalistic. The company that spawned Neutron Jack is now being forced to include within its proxy materials a shareholder proposal calling on GE to justify lobbying for global warming regulation.

Action Fund Management, LLC (AFM), investment advisor to the Free Enterprise Action Fund (Ticker: FEAOX) wants GE to report to shareholders on the scientific and economic analyses relevant to GE's climate change policy.

The FEAOX a publicly-traded mutual fund, filed the proposal because GE is lobbying for government regulation of greenhouse gas emissions. Such regulation, if enacted, may raise energy prices and reduce energy availability which, in turn, may harm the U.S. economy, GE's earnings and shareholder value. You see GE may actually destroy the American way of life.

The fund whose web site includes a prominent quote from Milton Friedman “The social responsibility of a business is to increase its profits” has produced very lackluster returns of its own. Approximately 10% since inception around two years ago. They claim the mantle of shareholder activism and have a portfolio of approximately $4.5 billion.

Usually fund managers tout their successes at increasing wealth. The web site info is meager on background info on the principals much less anything as capitalistic as increasing your wealth. This all smacks of reactionary politics with the ancien regime at its worst. I have not spotted it yet but I suspect the flat earth society is deeply involved.

GE has identified the environment as a key strategic sector for future investment and growth. This naturally means lobbying the government in an attempt to shape the landscape in favour of GE initiatives. This is nothing really new. No one else is truly disputing GE’s vision. There will be lots to say about how the strategy is rolled out and executed.

What responsibilities does FEAOX accept for attempting to manage GE on a day to day basis? If you do not like managements shtick sell the stock, go short, write calls and or buy puts. FEAOX quite frankly cannot connect the dots in its own arguments. They do not deserve investor support.