By Fraser P. Seitel
It is time once again for that annual ritual where 14,000 public company CEOs making tens of millions of dollars are dragged kicking and screaming to drone on about the "past year's progress" and face a host of irreverent and irrelevant questions from tens of shareholders gathered in convocation at the Securities and Exchange Commission-required "corporate annual meeting."
I say "tens of shareholders," because that, alas, is what today's annual meetings typically draw – a grab bag of attendees, generally composed of less-than-interested employees who work in the building and are more or less obligated to attend, old people with little else to do, and a dwindling posse of aging "corporate gadflies," whose intentions in altering corporate governance are about as pure as Donald Trump's in challenging the [resident's birth certificate.
Occasionally, one might also encounter a disgruntled ex-employee wishing to mix it up with the folks who done him wrong. But even these recalcitrants are becoming harder to find.
The people who really matter – institutional and individual shareholders – rarely attend the annual boondoggle.
So here's the point. Where once the annual meeting may have been justified in exposing secretive companies to at least one day of open disclosure, in today's environment of the Internet and round-the-clock business journalism, the annual meeting – at least as it is currently composed – no longer makes sense.
It has become a colossal waste of corporate shareholder money and corporate executive time that reveals little and proves nothing. Clearly, the traditional annual meeting should be replaced with a more efficient 21st century substitute that fulfills SEC requirements and doesn't waste everybody's time and money.
Here's why annual meetings no longer make sense:
• Canned speech.
Annual meetings invariably begin with the CEO – and, if you're really unlucky, the CFO – rehashing the "Letter from the Chairman" from the just-distributed annual report. Rarely is fresh material included in these reports, because, frankly, most shareholders don't read the letter. And even more frankly, the annual meeting speech, delivered as it is before precious few of the shareholders, just ain't worth it.
So the result is recycled material, generally delivered in an uninspired manner by corporate officers going through the motions.
• Cooked votes.
After the speeches, it's time for the shareholders to vote for directors standing for reelection, the outside auditors, and several shareholder resolutions. These are important pieces of business, but they've already been decided, through proxy, by the time the meeting commences.
Most of these proxy votes are cast by institutions, which control the vast majority of votes. And rarely, if ever, is management's will challenged. So the vote is "cooked," and the meeting voting is a charade.
• Worthless questioning.
The idea that shareholders get an opportunity to grill management is certainly a noble one in theory. It just doesn't work in practice.
Annual meeting question periods are generally dominated by a small group of wingnuts, who thrive on their annual moment in the limelight by terrorizing chairmen with inane accusations and incessant babble. In the old days, gadflies like the Gilbert brothers, Lewis and John, would put management through its paces with pointed questions, based on their own knowledge of accounting.
Today, the Gilberts have passed on, and 21st century gadflies are led by the impenetrable Evelyn Y. Davis, the aging and certifiable loony toon, who has made corporate CEO's lives miserable for 40 years. (A friend of mine once had to stop his chairman from taking a swing at the diminutive Davis, so thoroughly had she annoyed him).
The point is that encouraging publicity seekers like Davis to spread their wings once a year would seem to be the last thing shareholders should be putting on their tab.
So what to do to rescue the annual ritual and bring it into the Internet age.
Former Lockheed Martin Chairman Norm Augustine has suggested that shareholders should submit serious questions about the company; the outside auditors should review them and select a number to convey to management; and then management should respond to shareholders with its answers on the Net.
Another alternative, attempted by several companies, is a "virtual meeting," at which holders submit questions to management over the Net. While some object that this negates the "spontaneity" of the in-person meetings, such a format for most companies, if only for the cost savings alone, makes great good sense.
Of course, some in-person annual meetings serve a purpose – Exxon's of a few years ago, when Rockefeller descendants spoke in favor of separating the chairman and CEO. But these worthwhile meetings are clearly the minority.
In most cases, the annual meeting is as outmoded as the buggy whip. The whole concept ought to be scrapped for something that reflects the new media and a new day.
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