Annual Meetings Don't Have To Be A Waste Of Everybody's Time
'Annual meetings," top chief executive, "should be held in a phone booth."
So much for the one legal requirement for potential personal contact between the users, the providers, and the guardians of capital in Corporate America. Warren E. Buffett may glory in Berkshire Hathaway Inc.'s yearly rite of spring, but most other chief executives and shareholders have written off these gatherings completely. As for directors, they have been known to sit in the front row, fast asleep.
Annual meetings are a farce because they have been taken over by gadflies who press their personal concerns: When will the meeting be held in their hometown? How can their car defect be fixed? Why can't they find a product in some small outlet? These antics leave little room for serious discourse--such as questions about performance. For its part, management often wastes time with slick corporate histories and videos of operations. "The only thing that can happen at an annual meeting is damage," says a CEO who sits on three boards. "You try to get through it without anything happening. There's only downside." He would like to abolish them completely, "except that it would be misconstrued."
TWO TIERS. Maybe annual meetings could be made more useful. In recent years, the dynamics of stock ownership have changed dramatically, as pension and mutual funds have replaced individuals as the key source of capital. Companies should try to draw these larger shareholders to their meetings. And these investors should want to go, not just when there's poor performance. The trick is to accomplish this without alienating the employees, retirees, and individuals who now regularly attend.
For a start, because institutions tend to be more sophisticated owners, management should trim the slick presentations to allow more time for real questions. Much of the data presented is already public and months old, covering the previous year. If management must do a presentation, it should focus on current results.
Companies might also try premeeting meetings for very large investors. Often, as few as a dozen institutions own 40% to 50% of a company--they have a right to tell management what's on their mind. This forum needn't touch on inside information, causing trading problems. Those concerned that the rights of individual investors might be abused should consider that big shareholders already get more information, earlier, than individuals. "Lots of companies fax press releases to large holders, while individuals read the news the next day in the newspapers," notes one securities lawyer.
And why should institutions spend money trekking to Oklahoma City or Tampa or Seattle if a company is doing O. K., particularly if they invest in thousands of companies? Perhaps they shouldn't. Here's where technologycan help: Companies could experimentwith teleconferencing their meetings.To offset the added expense of teleconferencing, companies might consider cutting back on the goody bags they pass out each year to meeting attendees. Bribing shareholders with corporate products not only appeals to the kooks but also is wasteful.
Revamping annual meetings won't fix all the communications problems between shareholders, directors, and management. But there's little question that the meetings are still stuck in the past. It's time to transform them into a real forum for communication.