How Annual Shareholder Meetings Are Changing: Notables from BofA's Meeting
I recognize that the heavy media attention paid to last week's Banc of America annual meeting of shareholders is an anomaly and will never be the norm for all companies- or even the norm for an individual company from year-to-year. Still, the heightened level of attention paid to the meeting - including details that many of us in the business would consider minor - should serve as a "wake-up call" to all companies that annual meetings are indeed changing.
Here are a few facts about the BofA meeting: four hours long; 2000 in attendance, with many disgruntled shareholders turned away (and some complaints that "insiders" displaced shareholders who traveled far to attend); two directors with over 30% withhold votes and four more with more than 20% (with those numbers likely higher if broker nonvotes were removed, per this article); and a binding "split the Chair/CEO" proposal garnering 50.3% support.
Here are some takeaways from the BofA meeting that relate to growing trends:
1. People Expect Immediate Voting Results - As just mentioned last week in this blog, there is a growing expectation that the voting results will be announced at the conclusion of the meeting - since the general public is conditioned by the immediacy of the results produced by our political elections.
I watched numerous news accounts on the day of Banc of America's meeting and every single reporter spent considerable time about their frustration over how the voting results were not announced at the conclusion of the meeting. Can you imagine what those reporters would have said if they knew that the typical timeframe for reporting voting results from an April meeting was mid-August? Wisely, BofA recognized the public relations danger of waiting that long - and a few hours after the meeting, the company released its results in a press release.
2. The Nature of the Media is Changing - There was quite a bit of "live blogging" at the meeting (including live tweeting); this type of live coverage will undoubtably grow for many companies. Live bloggers/tweeters included: SEIU Blog; Rick Rothacker of the Charlotte Observer; and radio station WFAE (click on live blog link). And of course, other blogs covered the meeting after-the fact (eg. DealBreaker).
One consequence of coverage provided by others than the mass media is that the more interesting parts of the meeting were covered. For example, there was considerable commentary about Evelyn Y. Davis, who apparently was in classic form. Evelyn talked so much that people were shouting "Order!" at her - and at one point, the entire packed theatre started clapping in the middle of her antics in the hopes of getting her to sit down. Here is one blog that focused on Evelyn - and here is another blog.
3. Lack of Attention to CEO Succession Can Be News - As noted in this WSJ article, a reporter was able to sleuth that the board meeting held after the shareholders' meeting did not include a discussion of CEO succession planning. CEO succession planning continues to be the least understood part of a board's job - yet, probably the most important. Learn more about how to implement a succession plan during our June 17th webcast: "How to Plan for CEO (and Other Senior Manager) Succession."
4. CEO Lewis Loses His Chair Title - As noted in this WSJ article, BofA's shareholders voted in favor of a binding bylaw amendment requiring the board to split the CEO and Chair jobs at the company, mostly aimed at Ken Lewis who held both titles. After the shareholder meeting, BofA's board acted in the wake of the vote and split the jobs (and a longtime director became the board chair). According to RiskMetrics, the vote marked the first time that a S&P 500 company was forced by shareholders to strip a CEO of his Chair duties.
5. The Media Might Push Shareholder for More Withholds - Check out this Bloomberg article entitled "Bank of America Owners Declare War on Taxpayers," in which Jonathan Weil rails against those BofA shareholders that didn't withhold their votes (despite the quote from Prof. Charles Elson in the article, who properly recognizes that the level of withhold votes here was quite significant compared to historical norms).
6. Coming Soon: Online Battle for Board Seats - Even though BofA knew in advance that its meeting would be contentious - a group of seven unions had announced a "just vote no" campaign beforehand - it still didn't have a notable online campaign against it (other than a few efforts to get similarly-minded people together like this "call to action" to have BofA stop funding coal). Based on continuing trends in the political arena (see this Washington Post article about how the current Virginia Governor's race is being waged primarily online), I think it's worth reading my article – "The Coming Online IR Campaigns: The Future of Director Elections" - from the Spring '08 issue of InvestorRelationships.com well before the 2010 proxy season so you can be prepared for some possible changes next year.
It's worth wrapping up my thoughts on BofA with an excerpt from this commentary from Beth Young of The Corporate Library:
A second shareholder proposal, to give holders of 10% of B of A’s shares the ability to call a special shareholder meeting, nearly passed, garnering over 49% of the vote. What’s surprising about this proposal’s near-passage is that B of A, unlike the majority of companies we cover, already allows shareholders to call a special meeting, although it requires that holders of 25% of shares make the demand. Often, the fact that a company has gone a good part of the way toward implementing a proposal undercuts shareholder support for it because many shareholders are reluctant to micromanage. That was not the case at B of A this year, however.
Finally, B of A was required to put up a management proposal for an advisory vote on executive compensation as a result of its participation in TARP. About 71% of shares voted in favor of this proposal, a high proportion given the extent of shareholder anger. The ability of brokers to fill in votes for their customers who did not vote, the so-called “broker-vote,” likely boosted the vote on this proposal. (Broker voting, a creature of stock exchange rules, is not available on shareholder proposals.)
Although the SEC appears poised to approve changes to the broker-may-vote rule that will prevent its use in uncontested director elections—broker votes accounted for some of the support for Mr. Lewis and the other embattled B of A directors—those changes would not extend to the shareholder advisory vote on executive compensation. It seems likely that shareholders will press the SEC to keep broker votes from being cast on advisory votes in the 2010 proxy season.
Happy Anniversary Baby! #7 and Counting
Yes, today marks seven years of my blither and blother on this blog (note the DealLawyers.com Blog is nearly six years old - not shabby!). It's the one time of the year that I feel entitled to toot my own horn - as it takes stamina and boldness to blog for so long. A hearty "thanks" to all those that read this blog for putting up with my personality. I'm sure I won't get more refined with age.
I'm excited about our upcoming webcast - "Looking Out for #1: How to Manage Your Career" - because it will enable me to share some insights about blogging that I have gleaned over the years. It will hopefully enable you to feel more "blog proud" rather than "blog tolerant," two nice terms-of-art coined by "3 Geeks and a Law Blog" in this recent piece.
I'm excited to see that another of the old-timer bloggers, Mike O'Sullivan of Munger, Tolles & Olson, is back on the scene blogging again after a five year hiatus. Give his new "Provided However" Blog a try...
Our May Eminders is Posted!
- Broc Romanek