2010: Will this be the year of consumer revolt?

Image by qi.Thomas via Flickr

Leafing through yesterday’s paper (don’t ask, suffice it to say I have a reason for being a day behind) I’m struck by the number of ways consumers are getting screwed. Whatever happened to the idea that treating people well ensures they’ll keep coming back for more?
Let’s pick on Japan first. Yeah, Toyota is bending over backwards with its mea culpas in the United States. But in Japan? Not only are they ignoring safety problems with vehicles, but the government is helping them do so. Here’s what happened to one woman who was in an injury-laden accident when her Toyota accelerated beyond her control:

She says that Toyota — from her dealer to headquarters — has not responded to her inquiries, and Japanese authorities have been indifferent to her concerns as a consumer.

Mrs. Sakai says the Tokyo Metropolitan Police urged her to sign a statement saying that she pressed the accelerator by mistake — something she strongly denies. She says the police told her she could have her damaged car back to get it repaired if she made that admission. She declined.
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Veterans of Japan’s moribund consumer rights movement say that Mrs. Sakai, like many Japanese, is the victim of a Japanese establishment that values Japanese business over Japanese consumers, and the lack of consumer protections here.

“In Japan, there is a phrase: if something smells, put a lid on it,” said Shunkichi Takayama, a Tokyo-based lawyer who has handled complaints related to Toyota vehicles.

The article goes on to show how the Japanese government protected a company that made faulty heaters, and another that sold pure ground beef that, well, sure wasn’t.

The one hopeful thing: The woman in that accident came forward and told her story to an outraged reporter. In Japan, where “The nail that sticks up gets hammered down” is the cautionary phrase that seems to rule behavior, that was a hugely brave thing to do. Again, is a consumer revolt in the making?

Moving on to the United States. There’s a fairly upbeat piece that describes how small investors, that most powerless of groups, may soon find ways to make their voices heard, albeit at whisper decibels. But it is downright depressing to be reminded about how completely their voices are muffled now. They have no say about who is nominated to corporate boards; directors don’t need majority votes, so withholding a vote is meaningless; your broker can cast your vote if you don’t — and generally votes with management.

And the proposed fixes — hence the upbeat characterization — are incremental improvements at best. Starting this year brokers can no longer vote your shares without your permission. Some companies have adopted majority vote for directors, and a growing number are giving shareholders a non-binding vote on compensation plans. That non-binding part sticks in my craw, but a whisper is still better than muteness.

But back to my headline: Is a consumer revolt in the making?

More voter resources are beginning to sprout on the Web that aim to educate smaller investors, demystify the issues on the ballot and make voting easier.

Investors would also stand to benefit from the so-called Shareholder Bill of Rights, legislation proposed by Senator Charles Schumer of New York and Senator Maria Cantwell of Washington, both Democrats, most of which was included in the original draft of Senator Christopher Dodd’s financial overhaul bill.

Business groups, and some Republicans are fighting that legislation — twas it ever thus? — and it may not survive. But the SEC is looking to pass rules this year that give shareholders proxy access — a way to get their own board nominees into proxy materials.

But most important, small investors control about 30% of shares, and if they get their act together they can have a truly effective revolt.

“Thirty percent of outstanding shares is a substantial portion, easily enough to change the outcome of many proxy voting results,” said Mark Latham, a member of the S.E.C.’s investor advisory committee.

Michael Passoff, an associate director at As You Sow, a shareholder advocacy group on environmental issues, has first-hand experience. “There have been many successes shareholders have had in changing corporate policies or practices,” he said. “You can imagine virtually all retail shareholders supporting resolutions that would limit or link executive pay to performance.”

Read the piece — it gives tips on how you can make more of an impact. None of them are earthshattering, or are likely to get corporate directors quaking. But, repeating myself, it’s a start.

And then there’s the piece that doesn’t chronicle nascent signs of consumer revolt, but certainly should help spark one. A bill protecting consumers from predatory bankers and brokers should be a slam-dunk, Instead, it’s mired in attempts to protect bankers and brokers from effects of the bill.

Republicans want the Federal Reserve or the FDIC to house a new consumer protection unit. And they want bank regulators to have veto power over the new agency. Foxes guarding henhouses, anyone?

The Fed, for instance, ignored years of warnings about the dangers of subprime mortgages and overdraft fees before finally taking substantive action in recent years.
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Kathleen E. Keest, a lawyer at the Center for Responsible Lending, said that while bank regulators already had some consumer protection duties, it “was an afterthought, at best, and viewed as a drag on profitability and innovation.”
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“Anything that would subordinate this to bank regulators would be a bad mistake,” Mr. Frank said. “If you could trust bank regulators to handle consumer protection, we wouldn’t need to be doing this. There’s a natural tension there. It gets second priority.”

Amen, Barney.
But one thing on which all sides agree: The status quo is simply not tenable, consumers can not be left to fend for themselves.

Man the barricades, folks. This may just be our year.