Heard Off the Street: Investor meetings becoming less dull

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The customarily somnolent annual shareholder meeting season has provided more excitement than normal this year, elevating blood pressure levels in the corporate suite and making for entertaining yarns that readers actually read.

To be sure, most of these meticulously scripted manifestations of corporate democracy are pulled off without a hitch, making them proceedings only narcoleptics can appreciate.

At such meetings, corporate dignitaries in thoroughly pressed suits are introduced and greeted with polite applause. Regardless of what last year's bottom line and the stock price look like, the chairman soothingly reassures shareholders the Titanic is on course and on time. Directors are perfunctorily elected, auditors routinely reappointed and incentive compensation plans unquestioningly rubber-stamped by supplicant shareholders.

Occasionally, these well-oiled machines are gummed up by a shareholder who has yet to grasp the concept that companies must consistently increase their earnings in order to be capable of paying and increasing their dividend. What ensues is an incoherent, rambling argument for boosting the quarterly payout that the poker-faced chairman or CEO patiently endures before thanking the shareholder for interest in the enterprise.

However, this year's crop of shareholder meetings includes a few black tulips among the usual reds, whites and yellows.

Upset over CEO pay, the fracking practices of Marcellus Shale operators and other perceived corporate malefactions, dissident shareholders, accompanied in some cases by protestors who don't even enjoy the fruits of owning a company's shares, are attempting to turn the gatherings into a forum for debating social or economic justice.

Right here in our fair city, rabble-rousers disrupted meetings of EQT and Bank of New York Mellon shareholders.

"You made $12 million [in 2011] ... I don't know how you sleep at night making that when lower-paid employees are making $10 an hour," one BNY Mellon investor told Chairman and CEO Gerald Hassell at the bank's April 10 meeting at the Omni William Penn.

Mr. Hassell's response -- that he started at the bank 38 years ago making comparable wages and "by God's good graces and hard work, I'm in the position I am today" -- did not quiet the restless natives.

A week later, EQT's shareholders meeting was disrupted by inquiring shareholders who challenged the environmental soundness of the energy producer's drilling practices and were concerned about how Chairman and CEO David Porges sleeps at night. The meeting was adjourned for two hours while the unruly guests were dispatched. Two were led away in handcuffs and cited for disorderly conduct.

"I don't think the unrest had anything to do with EQT proper," Mr. Porges said following the meeting.

Fortunately, Corporate America is well schooled in how to manage such delicate situations.

A memorandum issued to clients in March by King & Spalding, an international law firm whose clients include half of the Fortune 100, warned clients of the potential for unscripted events at shareholder meetings this year and provided some ground rules for mitigating the unpleasantness.

The memo's guidance included engaging problem shareholders well in advance of the meeting, "if for no other reason than to be able to identify them and respond appropriately if they show up at the meeting." Lawyers also advised having management representatives greet shareholders at a check-in area, where the discontented can blow off some steam before the meeting begins.

"Many shareholders who arrive at the meeting with a confrontational disposition may actually prefer to 'vent' outside of the meeting," the firm observed.

King & Spalding also recommended making the official meeting as short as possible by delaying any presentation by the chairman or CEO and the question-and-answer period until after the results of director elections and other proposals are announced and the meeting is officially adjourned.

That way, any untoward shareholder comments regarding CEO pay, lackluster stock performance and other matters "will not be reflected in the official minutes of the meeting," the firm stated.

(As an aside, the only thing more boring than a shareholders meeting is reading the minutes of the proceedings.)

When it comes to indelicate questions, "We have found it to be very helpful to preempt the question by having a shareholder friendly to management ask the question in a non-aggressive, impartial manner," the firm counseled.

King & Spalding acknowledged that while having the media present "may be unavoidable," companies should consider admitting only print media. The danger of welcoming video journalists is that they might capture the disruptions. Although more companies are webcasting their meetings, that video "is strictly controlled by the company so that if there is a disruption, the camera avoids it," the memo stated.

As thorough as the firm's advice is, the high-priced attorneys omitted the most obvious suggestion: Wake shareholders up when the meeting is over.


Len Boselovic: lboselovic@post-gazette.com or 412-263-1941. First Published May 6, 2012 12:00 AM


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