The Best, Worst, and You-Just-Can't-Win Annual Meetings
from
September/October 2006
by Randy Myers
“It’s the annual day of reckoning,” says Bill Crane, chairman of proxy solicitor Georgeson Shareholder Inc., about that yearly rite of corporate passage, the annual meeting. “You have to stand up in front of your shareholders and explain what you’ve done for the year and why you should be reelected.” That is, unless you’re former Homeland Security czar Thomas J. Ridge, or any of the other ten inside and outside directors of Home Depot, as it famously turned out. Not one of them showed up at this year’s event.
Their absence sparked angry protests by shareholders and various governance observers—and possibly envy among other directors for their flip-the-bird attitude. Let’s face it: With few exceptions, directors don’t much enjoy the annual meeting. Of course, some have a better time than others. Here’s our take on the best meetings (from the directors’ point of view), the worst, and two that must have left their directors flummoxed.
THE BEST.
Who wouldn’t want to serve on the board of Berkshire Hathaway? Okay, so it’s one of the lowest-paid board positions (see page 44) and Berkshire’s return to shareholders hasn’t been that sterling of late. But do you think the shareholders held it against Bill Gates or Coca-Cola veteran Donald Keough or the rest of the 11-member board? No way. As always, the annual turnout was a lovefest. Some 24,000 shareholders packed the hockey arena of the Qwest Center in Omaha, Nebraska (the spillover crowd was accommodated in a nearby theater), to hear chairman and CEO Warren Buffett, aided by sidekick Charlie Munger, preside over five hours of questions and answers. Next door, a trade center served as host to 32 Berkshire Hathaway companies hawking their wares, from Fruit of the Loom underwear to Benjamin Moore paints. Before the Q&A, Buffett screened a video filled with spoofs and celebrities, including actresses from the TV show
Desperate Housewives
, California governor Arnold Schwarzenegger, rapper Snoop Dogg, and actress Jamie Lee Curtis. What better segue into a discussion of Berkshire Hathaway’s acquisition strategy, the outlook for the dollar against foreign currencies, commodity speculation, and short-selling?
Citigroup’s annual meeting was judged a lovefest too—not so much because of how the company fared last year (total shareholder return was 22%) as for the opportunity it gave shareholders to bid an official goodbye to retiring chairman Sandy Weill. He put the group together over a six-year reign and made a lot of those shareholders very rich in the process. Shares rose 200% during his tenure. The festivities, held at New York City’s Carnegie Hall, included a poem, “Sandy Weill, We Love Your Style,” recited by a shareholder dressed in red—a color symbolizing Travelers, the company Weill used to build his empire. And a filmed tribute featured, among other luminaries, former CBS News anchor Dan Rather and former president Gerald Ford, an honorary board member. It must have been nice for the rest of the 16-person board, which includes legendary Silicon Valley investor Kenneth T. Derr and Xerox CEO Anne Mulcahy, to bask in all the pleasantries.
THE WORST. Here’s a crowded field, even if you don’t include Home Depot (and why should you, since the directors were AWOL?). Halliburton, whose 11 board members include former American Airlines CEO Robert Crandall and (again) Kenneth Derr, got knocked for having its meeting in the Oklahoma boonies—a ploy, critics said, to keep shareholders away. It didn’t work. An attempt to make a citizen’s arrest of chairman and CEO David Lesar ended in the arrest of 16 protesters (a “traveling carnival,” opined the Daily Oklahoman ). At Pfizer’s meeting, the 13-person board (including Brown University president Ruth J. Simmons and William H. Gray III, chairman of Granite Broadcasting Corp.) took heat for the rich compensation doled out to chairman and CEO Henry A. McKinnell Jr. UnitedHealth Group’s board—with a head count of 12, including Mary Mundinger, dean of the Columbia University School of Nursing, and Robert Ryan, former CFO of Medtronic—likewise came under fire for what it paid its chairman and CEO, William W. McGuire. (For how boards can stay out of trouble on this subject, see “Get Ready for the Next Spotlight on CEO Pay,” which begins on page 32.)
Flummoxed?
Here’s where trying to be politically correct can get you. The boards of Goldman Sachs (Allstate chairman Edward Liddy; William George, head of the Global Center for Leadership and Business Ethics; and nine others) and JPMorgan Chase (former Exxon Mobil boss Lee Raymond, Johnson & Johnson chairman William C. Weldon, and 12 others) both got nailed by the Free Enterprise Action Fund. The small mutual fund, which had stock in both institutions, criticized them for squandering money on pro-environment agendas. It accused Goldman of encouraging “anti-growth” policies and went after Chase for lobbying in favor of greenhouse-gas regulations.
Some outfits, including consumer-electronics manufacturer Bell & Howell and Inforte Corp., a Chicago management consulting firm, have started hosting virtual annual meetings. That might be welcome at a lot of other companies too.
