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Shareholder season brings corporate issues to light
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It’s annual general meeting season — the time of year when some of the world’s biggest companies gather to report to shareholders.
There was a time when these meetings took place without much fanfare, mostly unnoticed by the public. That has not been true for a couple of years now.
A worsening economy and widening inequality have spurred more people to become more engaged and take an interest in the activities of companies and those who run them.
In 2012, shareholders and others started shining a bright light on boards, questioning their decisions and activities, and those of individual members, and thus was born the Shareholder Spring. People grew tired of tone-deaf board directors operating in soundproof rooms, seemingly ignoring economic realities and the public’s mood.
Many companies and company boards hoped that this heightened interest would pass quickly; instead, it has matured. Discontent has continued to mount, and investors, employees, politicians and members of the public now want to know not only about executive compensation, but also about the frequently staggering discrepancy between what companies’ highest- and lowest-paid personnel earn.
They want to know about living wages and zero-hours contracts. They want to know what companies are doing to address climate change, whether they are responsible community members, how they behave in conflict zones and much more.
Those asking the questions are no longer content to protest outside. They are becoming increasingly sophisticated about how to be heard, buying shares, stepping up to the microphone and looking board members in the eye, so that their questions become part of the official minutes. And they are putting pressure on companies’ major investors to hold board members to account as well.
Asking hard questions
The questions posed and statements made can sometimes be long-winded. But many of them are legitimate, and they are an important reminder to boards that they must serve the company’s entire ecosystem — investors, employees, customers and community alike.
Indeed, these open meetings are a reminder that board members must ask the hard questions all year round, rather than simply rubber-stamping management proposals or going along to get along.
Interestingly, just as the movement to hold boards to account has gained greater traction, some companies have adopted new ways of convening annual shareholder meetings. These were once fairly staid gatherings. The companies’ senior management would walk investors and board members through the reporting formalities step by step, present results, take questions, vote and move on. There was tea, coffee and biscuits, but nothing fancy.
In recent years, however, there has been a trend toward a more carnival-like atmosphere, with companies bringing in big-name entertainers and turning the event into a feel-good pep rally. Last year, Wal-Mart’s annual meeting featured Harry Connick, Jr, Robin Thicke and Pharrell Williams. In 2013, Elton John performed.
In contrast, other companies have swung to the opposite extreme and embraced fully virtual meetings. The board gathers in front of a camera for a live webcast to shareholders, takes questions submitted in advance, and avoids the protesters altogether.
There is a virtue to having a meeting with a virtual component: businesses are global, and so are their investors, who can participate without having to get on a plane. But a webcast of a meeting with a live audience would be the ideal combination. And while companies might argue that entirely virtual meetings save money — which of course is true — investors do not need Robin Thicke. They will settle for good numbers, serious discussion and a dry biscuit.
Boards and managers must take these meetings seriously. Part of the job is facing those with something at stake. Hosting circuses or hiding behind cameras will not keep tough questions from coming. A seat at the boardroom table comes with the responsibility to stand up and do this vital part of the job — in person and without musical accompaniment.
Lucy P. Marcus is CEO of Marcus Venture Consulting. Copyright: Project Syndicate 1995-2015
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