Town Hall Shareholder Meetings
It’s a presidential campaign year here in the U.S., and though the election is still over 6 months away, we’ve already been enlightened (or depressed) by a large number of candidate debates and town halls. Whatever your political views, the candidates seem able to instantly recall policy, financial or data details off the top of their heads. Trade figures, funding levels, voting records — their ability to deliver these on the spot, under bright lights and hostile questioning, is an impressive skill.
In the corporate world, it’s also proxy season now, with managers and directors under their own spotlights at annual meetings. One pattern in the works at annual meetings is more focus on and accountability for members of the board. The dividing lines between corporate results and strategy and issues of governance, have grown more vague. Proxy access brings investors increasingly into the work of the board. Activists are tying environmental, social and governance issues more closely to strategic and operational goals (and the fact that “governance” is tied in with the ESG movement suggests its growing importance).
Traditional board involvement in annual meetings consisted of a wave of the hand when being introduced, and deferring any shareholder queries to management. Slowly, however, more questions are making their way through this stonewall directly to board members, usually on such items as executive pay, the role of the audit committee, or board structure.
Here’s a good hypothetical for board members — what if your role at the corporate annual meeting looked less like an awards dinner, and more like a presidential candidate town hall? Watch the next such political roasting, and imagine yourself, as chair of the audit or compensation committee, sitting on that stage under the spotlight (maybe even being grilled by Anderson Cooper). Tell us the executive pay philosophy your board came up with, its details, and why you think it’s effective? How does it compare to benchmark companies? As audit committee chair, how did you miss this restatement item? What will its financial impact be? Discuss your last board evaluation, and what it found on the board’s diversity, talent and tenure.
No, CNN likely won’t be hosting any corporate board town halls this annual meeting season. But if they did, would you be ready? — Ralph Ward
Ralph Ward is an internationally-recognized writer and speaker on the role of boards of directors, boardroom leadership, and the future of governance worldwide. He is publisher of the online email newsletter Boardroom INSIDER, the worldwide source for practical, first-hand advice on better boards and directors. He also edits The Corporate Board magazine, and speaks and consults on governance issues (see the Boardroom Masterclass page).
Ward is author of the books Boardroom Q&A (2011), The New Boardroom Leaders (2008),Saving the Corporate Board (2003), Improving Corporate Boards: The Boardroom INSIDER Guidebook (2000), and 21st Century Corporate Board (1997).
Could Your Board Handle a “Town Hall” Style Annual Meeting? – Publisher’s Note
This article originally appeared in the April 2016 edition of Boardroom INSIDER as Could Your Board Handle a “Town Hall” Annual Meeting? I added the graphics, headings, ads and shortened the title. I would love to see more companies going the route of Warren Buffett and Berkshire Hathaway by whipping up shareholder enthusiasm through fun but informative town hall style meetings. However, the same issue of Ralph Ward’s Boardroom INSIDER also included a disturbing trend in the opposite direction to virtual-only meetings. That article was titled, Virtual Annual Meetings & Your Board – 5 Tips.
Ward reports that Broadridge hosted just 4 such meetings in 2009, but 140 by 2015 — and predicts a further 44% increase for 2016. “Virtual shareholder meetings offer obvious savings in costs and effort (plus fewer protests outside), but activist groups and investor advisory firms remain suspicious that companies will use the medium to silence debate.”
“In the early years of virtual AGM capability, hybrid meetings outstripped the fully virtual ones, but the scale has increasingly tipped toward the fully virtual programs (90 virtual versus 44 hybrid in 2015). Ward offers up helpful tips but I would include one major point. Don’t go virtual-only. Don’t lock shareholders away from their only opportunity to look you in the eye and ask those questions.
The Council of Institutional Investors, whose members have $3 trillion invested, welcome hybrid but oppose fully virtual meetings. (policy 4.7) “Companies should hold shareowner meetings by remote communication (so-called “virtual” meetings) only as a supplement to traditional in-person shareowner meetings, not as a substitute.” Electronic communications should used to broaden, not limit, shareowner meeting participation. Live meetings that shareholders can attend in person are still considered important. Moving to a town hall style meeting that is also open to attendance and participation by shareholders through the Internet would be even better.