Consider what happened this year: James Robinson III, American Express Co. chairman and chief executive officer, was unceremoniously toppled by his board.
So were John Akers of International Business Machines Corp., and Paul Lego of Westinghouse Electric Corp. Kay Whitmore of Eastman Kodak Co. was fired. And just last month, Anthony D'Amato of Borden Inc. was shown the door.
What's more, for every IBM or Kodak, there was a small or midsized company that parted with its chief executive.
Among them, Egghead Inc., General Instrument Corp., Quaker State Corp., CompUSA Inc., Plains Resources Inc., Mentor Graphics Corp. -- and the list goes on.
Carnage on this scale isn't provoked by a quibble over executive compensation or some poor quarterly results, although they're part of it. Instead, 1993 marked "a sea change" in corporate America, management experts say: It was the year that investors got angry, and board members -- especially outside directors -- took a more activist role.
It's "the closing of the chapter on [post-World War II] managerial capitalism," in which power was concentrated in the hands of company executives rather than directors or owners, said Jeffrey Sonnenfeld, business professor and corporate leadership expert at Emory University in Atlanta.
And it's not likely to be opened again soon. Large investors are already threatening more pain in the corporate suite in 1994.
For example, the $80 billion California Public Employees Retirement Fund (Calpers) has put 10 laggard companies on notice to improve their performance next year or face management turmoil. The fund has also sent warning letters to 22 other poor performers that are just a breath away from being targeted. Calpers plans to go public with its hit list in mid-January.
This year, Calpers, with 11,000 stocks in its portfolio, was a key figure behind palace revolts at IBM, Eastman Kodak, Boise Cascade Corp., Westinghouse, and Sears, Roebuck and Co. among others. "We were not satisfied with the results," said Richard Koppes, Calpers' general counsel.
The corporate upheaval of 1993 was the result of a variety of separate factors that taken as a whole challenged executives at companies too slow to adapt to market conditions.
The most significant element was the enormous and growing influence of institutional investors. Institutional holders -- pension funds, mutual funds and insurance companies -- own about half of all U.S. corporate equities. That's up from only about 10 percent in the 1970s, said Kit Bingham, director of research at the Lens Fund, an $11 million Washington-based investment group headed by shareholder activist Robert Monks.
Leverage of institutional investors is heightened even more because funds, to avoid huge transaction costs from constantly buying and selling stock, tend to hold on to stakes in companies they invest in for a long time.
Corporate directors "better pay attention to us," said Danny Bowers, chief investment officer for the $830 million Houston Firemen's Relief Retirement Fund.
The large holdings in themselves might not have amounted to much if new federal regulations hadn't given them teeth. In October 1992, the Securities and Exchange Commission rewrote proxy rules to let institutional investors communicate with each other more freely, make their opinions known to management and push for change in corporate policy.
Mr. Robinson at American Express learned just how powerful this can make institutional investors. In early January, Mr. Robinson said that he was ending his 15-year reign as CEO, but expected to remain as chairman of the company and its Shearson Lehman Brothers brokerage unit.
Major institutional holders didn't like the sound of it. Bitter over the sharp fall in the company's stock -- from about $39 in late 1989 to about $24 early last year -- and a 42 percent dip in earnings in 1992, large holders didn't want Mr. Robinson to maintain control of the board. Instead, they preferred to give incoming CEO Harvey Golub a chance to take the company in a new direction without Mr. Robinson looking over his shoulder.
J. P. Morgan & Co. was one of the rabble-rousers. Although the bank holding company usually stays in the background, this time it "didn't like Robinson's retention of the chairman title and had meetings with outside directors," Lens' Mr. Bingham said. Other holders "made a few dozen phone calls and agreed on a course of action," he recalled.
The campaign worked. Less than a week after Mr. Robinson said he planned to stay on as chairman, he resigned the company completely.
In the face of such institutional activism, directors increasingly rushed to "cover their rear ends, distancing themselves from CEOs, to avoid public scrutiny and possible litigation," Emory's Mr. Sonnenfeld said.