And Now, The Shareholder Manifesto

Central European investors are standing up for their rights

Martin Mosinger admits he's a troublemaker. A burly 28-year-old computer systems analyst, this Prague native has developed a highly visible second career as a shareholder activist in a country where shareholders didn't even exist a few years ago. Starting with a tiny stake of five shares in phone company SPT Telecom, he has nearly derailed a key foreign loan to SPT and won an important court victory that could throw into doubt many of the Czech Republic's privatization deals.

Mosinger is not the only activist to appear in Central Europe, where the corporate sector is coming to grips with the idea that even small shareholders have a voice in company affairs. In Hungary, dozens of activists surfaced at the spring annual meetings for such companies as oil and gas provider MOL, OTP Bank, and Csemege-Julius Meinl, a supermarket chain. Take Tamas Koranyi, a journalist for Hungarian business daily NAPI Gazdasag, who owns stock in each of the 43 listed companies on the Budapest exchange. He recently pressed successfully for a dividend increase from Inter-Europa Bank Rt.

Shareholder activists in the U.S. would readily understand Koranyi's push for a higher dividend. They would be puzzled by what's driving Mosinger, who shows how shareholder rights can be used in Central Europe to pursue political goals as well as economic ones. As he watched the Czech privatization program unfold, Mosinger felt the government of Prime Minister Vaclav Klaus was all too willing to hustle shares to foreign interests and ignore Czech shareholders in the process. "So I decided to make some noise," he says.

COURT PRESS. SPT, now 19% owned by local shareholders, is the object of Mosinger's wrath. Representing 600 shareholders, Mosinger filed a lawsuit against the government, questioning the sale of 27% of SPT to TelSource, a Swiss-Dutch consortium of telecom companies. That sale was decided on by the Economy Ministry, which Mosinger says has no right to direct company affairs. In May, a Commercial Court stunned SPT by siding with Mosinger. The ruling has technically invalidated the TelSource deal, but SPT has appealed and TelSource executives assume it will be reversed. The ruling also held up a $750 million loan from a Citicorp/Chase Manhattan-led consortium. The loan has now gone through after SPT and government officials assured the banks of TelSource's continued involvement.

Mosinger may well end up losing his fight with SPT, but he will keep advising other shareholder activists. Government officials vigorously defend their policies, saying foreign knowhow and capital are sorely needed. Good point. But if activists such as Mosinger persist, Central European companies and their foreign partners may find themselves forced to pay a lot more attention to small shareholders than they ever bargained on.

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