April 12, 2017

Confessions of An Annual Meeting Fanboy

Broc recently blogged about Gretchen Morgenson’s NY Times column on the growth of virtual annual meetings. Frankly, I can see why the virtual-only approach might be attractive to many companies whose live meetings are attended – much like my traumatic 10th birthday party – only by a handful of people who are paid to be there.

Still, I confess that even after decades of watching executives read from turgid scripts written by junior lawyers (“I move that the reading of the minutes of the 2016 annual meeting of shareholders of the Company be dispensed with blah, blah, blah. . .”), I’m kind of a fan of in-person annual meetings.

Done well, an annual meeting can provide a great opportunity to connect with retail shareholders, and there’s also something to be said for requiring the CEO to stand in-person before shareholders once a year without a mute button and a team of advisors to help with a response to a tough question.  But there’s more to recommend them than just that.

From microcap meetings held in a conference room to Berkshire-Hathaway’s annual epic, annual meetings frequently provide an endearing slice of Americana. Warren Buffett’s “Woodstock for Capitalists” is famous for its folksy charm – but you don’t have to go to Omaha for that.  At a community bank meeting that I attended last year in a small Ohio town, a very nice retiree proudly showed me a copy of a passbook for a savings account that her father opened for her at the bank in the 1930s (she brought it to show the CEO, who knew her by name, asked about her family, and very much admired her memorabilia).

For larger companies, annual meetings can also provide entertainment that rivals anything on reality TV. Where else can you see Jesse Jackson spar with Meg Whitman or watch Bill Ackman get verklempt in front of a couple thousand people for free? If that’s not your style, how about the guy who became a folk hero in Minneapolis by showing up at the Green Bay Packers annual meeting wearing a Vikings jersey? Perhaps your taste runs to the “annual meeting as performance art.”  If so, check out Google’s 2014 gala or Facebook’s fiesta  from that same year.

Seriously, why would anyone want to get rid of an event that can offer everything from Norman Rockwell to the “Gathering of the Juggalos”? So, while the future of shareholder engagement may well be in cyberspace, I hope that the in-person annual meeting doesn’t completely go the way of the Dodo. We’ll sure lose a lot if it does.

By the way, if you think annual meeting wackiness is a recent phenomenon, here’s an article describing the shouting match between Mitch (“Sing Along with Mitch”) Miller and legendary gadfly Evelyn Davis at the 1964 Xerox shareholders meeting.

Virtual Annual Meetings: New York Comptroller’s Not a Fan

This O’Melveny memo says that I’m not the only one who prefers live annual meetings.  New York’s Comptroller has a strong preference for them too – and it looks like New York’s pension funds intend to express that preference with their votes.  Here’s an excerpt:

 In addition to sending letters outlining his concerns to S&P 500 companies that have held virtual-only meetings, Comptroller Stringer has recommended that the trustees of the $170 billion New York City Pension Funds approve a new proxy guideline to discourage virtual-only meetings. If approved, the New York City Pension Funds would vote against all governance committee members of S&P 500 companies that hold virtual-only meetings in 2017, and would extend this voting policy to all US portfolio companies in 2018.

S&P 500 companies holding virtual-only meetings in 2017 could avoid an “against” vote from governance committee members only if they commit in advance of their 2017 annual meeting to hold their 2018 annual meeting in person or as a hybrid (virtual and in-person) meeting. The Pension Funds’ trustees are expected to vote on the voting-policy change in April 2017.

Class Actions:  More, More, More

Remember how 2016 set all kinds of records for securities class actions?  Well, Kevin LaCroix at The D&O Diary blogs that 2017 is on course to blow those records away:

The annualized pace of the 1st quarter’s litigation rate of 10.8% is more than four times the 1997-2015 litigation rate of 2.5%. In other words, at the current filing pace, if continued for the rest of the year, U.S. publicly traded companies would face a likelihood of getting hit with a securities suit four times greater than the average annual likelihood of a securities suit during the last two decades.

Kevin says that during the 1st quarter, U.S. publicly traded companies were being sued at an annualized rate of nearly 11%. That compares to a 5.8% rate for the record-breaking 2016 year, and an average litigation rate of just 2.5% from 1996 to 2015.  Merger objection litigation is part of the story, but far from all of it.  Check out Kevin’s blog for more details.

John Jenkins