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Directors & Boards
Robert H. Rock,
Publisher
James Kristie,
Editor
Martin D. Porter,
Associate Editor
Lisa
Cody,
Chief Financial Officer
David Shaw,
Publishing Director
Scott Chase,
Advertising Sales
1845 Walnut Street
Suite 900
Philadelphia, PA 19103
+1 (215) 567-3200
The Directors & Boards e-Briefing is produced by GRID Media LLC.
From Jim Kristie | Article of the
Month | Columnist
Reader Profile |
Research | News | Forum
Is There Any Hope for the
Annual Meeting?
In celebration of this month’s publication of our "Boardroom Briefing:
The Future of Annual Meetings," the October e-Briefing newsletter has
an annual meeting focus.
“The Future of Annual Meetings” is a special Boardroom Briefing
produced jointly by Directors &
Boards and the National Association of Corporate Directors. This
40-page report is being sent to all Directors
& Boards subscribers and members of the NACD in late
October. Click on the cover below to view our table of contents
and project sponsors.
an annual meeting to see CEOs take the
stage. It was an education in presentation skills to watch the
smooth-as-silk Steve Ross work the Warner Communications shareholder
crowd. A tough-as-nails CEO, Martin Davis of Gulf & Western, was
always good for a show in sparring with another Davis -- gadfly Evelyn
Davis. Bill McGowan, founder of MCI, had a funny and feisty manner in
running his company’s annual meeting -- no one, not even his board
members, was spared the occasional sharp-elbowed comment.That was then -- the 1980s. This is now.
The above-mentioned CEOs have long since passed on. And I have long
ceased attending annual meetings. It didn’t take a rookie reporter long
to learn that not only is there nothing of newsworthy note to reward
annual meeting attendance but also, and even more sadly, there is
rarely any useful insight to be gained either.
Is there any hope for the annual meeting as a viable part of the
corporate communications tool kit? We set out in search of an answer,
and the answers that we found may surprise and inspire.
Your Boardroom Briefing: The Future of Annual Meetings should be
in your mailbox by the end of October. You can also pick up a
copy at the NACD's Annual Conference in Washington, D.C., October
17-19. You may also contact me for a copy, or access a .pdf
version of the publication, which we'll post in this e-Briefing next
month.
And be sure to let me hear from you
once you’ve had a chance to read it. There is still room for lots more
opinion on why the annual meeting fails so miserably as a “leadership
moment” for CEOs and boards and what could be done about it. What
do you think about annual meetings?
*****
We're excited about our joint publishing
venture with the NACD, and are pleased to announce that we'll publish
three special Boardroom Briefings in 2005. These Boardroom
Briefings focus on a single topic of interest to board members, and
feature special research conducted by Directors
& Boards and the NACD, as well as a variety of insightful
pieces written by your peers. Look for our first 2005 Boardroom
Briefing in March. We'll look closely at the topic of succession
planning -- a critical issue for any board.
Jim Kristie is the editor and associate publisher of Directors & Boards.
Using proxy contest strategies to conduct a successful annual meeting
By Lawrence Lederman (pictured above) and Robert S. Reder (pictured
below)
Originally published in longer
form in Directors & Boards, Winter 2003.
In light of escalating shareholder activism and increased use of “vote
no” campaigns against incumbent directors, officers and directors
should focus as never before on preparing for an annual meeting they
once considered "routine." Even if no shareholder has proposed
alternative director candidates and the proposals to be voted on by
shareholders seem to be unobjectionable, management can no longer
assume that proxies are "in the mail." Rather, a concerted and
well-thought-out campaign to assure high voter turnout and a
comfortable winning margin is essential.
A successful annual meeting is an opportunity for management to instill
investor confidence and enhance its credibility with shareholders. On
the other hand, an annual meeting at which management-sponsored
candidates and proposals are approved by only slim margins or, much
worse, defeated can signal shareholder discontent and pave the way for
a proxy contest and/or hostile takeover activity. Furthermore, if the
SEC’s controversial shareholder access proposals are adopted, poor
voter turnout or a successful “vote no” campaign could result in
shareholders being able to include alternative director candidates in
the company’s proxy statement.
Many of the techniques that have become standard practice in proxy
contests will be useful to managers in improving the likelihood of a
successful annual meeting:
1. Advance Planning and
Preparation. Public companies should take a fresh look at their
annual meeting timelines and factor in more time for developing the
agenda and script for the meeting, reviewing shareholder nominations
for directors and other proposals, preparing disclosure documents,
obtaining SEC clearance (when necessary), lobbying shareholder advocacy
groups for their support, and soliciting proxies from shareholders. As
a result, the whole process should begin much earlier than it has in
the past so that management, together with their professional advisers,
can fully evaluate what types of issues will need to be addressed at
the next annual meeting and how best to secure a favorable vote.
[Read
the
Full Article]
View from the ‘Gadfly’ Seat
Opportunities for
Directors to Take Action
Editor’s Note: Lewis D. Gilbert was a conspicuous presence at annual meetings for more than 50 years as one of corporate America’s most prominent shareholder activists. His activism was first sparked in 1932 when he attended the annual meeting of New York’s Consolidated Gas Co. and the chairman refused to recognize his questions from the floor. The following essay is an abridged version of a longer article that he wrote for Directors & Boards in 1984. He died in 1993.
The role of the outside director continues to grow in importance. With shareholder scrutiny ever more intense, director vigilance over management and company operations has never been more crucial. The following are several issues and concerns where I see opportunities for the independent director to take action for the greater benefit of the public shareholder.
Shareholders are concerned with the manner in which directors are elected. I believe that the majority of concerned holders do not want staggered systems of electing directors. Besides being less democratic, it is not necessarily a deterrent against a takeover bid or proxy contest.
A proper question for shareholders and directors alike is the amount of executive compensation. Many owners feel enough is enough. In no place is there more danger of abuse than with the stock option. This was proved once again only recently when one executive at a large corporation retired, cashed in his options, and made double-digit millions. Should there be a limit of the amount of options one man can hold? Similarly, should there be some ceiling on pensions? If not, why not?
[Read the Full Article]
Chairman
Fox Run Capital Associates
Editor's note:
Each month, we ask a Directors & Boards reader to comment on
critical issues facing directors today. If you'd like to
participate in this section in the future, please email Scott Chase. Mr.
Plaskett's comments also appear in our "Boardroom Briefing: The Future
of Annual Meetings."
I don’t think annual meetings in their present form and as presently conducted reach a broad enough audience of shareholders. The focus is generally on peripheral issues and they attract mostly unhappy or disgruntled shareholders. They don’t achieve their stated objective of giving shareholders the opportunity to meet, discuss the company, and raise issues.
A web-based meeting would be a very effective way to reach a broader cross-section of shareholders. It could be much more controlled, like an analyst teleconference, where questions are queued, the question is asked, and the company responds. It’s difficult to engage in extended debate or argument, and can be an effective means of providing questions and answers without some of the interruptions that go with a face-to- face discussion. If the goal is to provide an opportunity for legitimate questions and the exchange of information, then face-to-face doesn’t add any value.
There has been discussion at the companies I serve as a director about changing the annual meeting, but nothing has moved to planning and implementation. We’re locked into the requirements of the exchanges, our own by-laws and state corporation law. And there’s a reluctance to take the first step to make changes.
Thomas G. Plaskett is the chairman of Fox Run Capital Associates, a private consulting firm focused on general management advisory services for emerging companies and corporate governance advisory services for both public and privately-held companies. He is a trustee of Kettering University, Flint, Michigan, presiding director of RadioShack Corporation, Fort Worth, Texas, and a director of Smart & Final, Inc., Los Angeles, California, Novell Corporation, Waltham, Massachusetts, and Alcon, Inc., Fort Worth, Texas.
The Value of Annual Meetings
551 directors, CEOs and senior corporate governance professionals responded to the survey, which was conducted in July.
According to the survey, 54.5% of respondents view the annual meeting as 'very important,' or 'somewhat important' as a corporate governance tool, with 45.5% saying the annual meeting is 'not very important' or 'not at all important.' Nearly 40% of respondents say the annual meeting doesn't advance their company's corporate objectives.
Attendance at the annual meeting seems high, with respondents reporting an average of 123 attendees at their last annual meeting. But that represents only 19% of the company's ownership. Institutional shareholders were noticeably absent. Even though institutional shareholders tend to own the majority of shares in respondent's companies, 54.6% reported that no institutional shareholder representatives attended their last annual meeting.
Complete survey results -- including directors' views on alternatives to the current annual meeting format -- will be available in the "Boardroom Briefing: The Future of Annual Meetings," to be published in mid-October.
October
6-8, 2004
INSEAD hosts its third International Directors' Forum in Fontainebleau,
France. This unique event brings together a select group of Chairmen
and Board Members from across Europe and the world who seek to improve
their Board's effectiveness, deepen their understanding of how other
top Boards operate, and exchange views on the implications of the
changing corporate governance context. The program is ISS-accredited.
Information on the event can be found at
October 14-15, 2004
The Practicing Law Institute and the American Management Association
host the Second Annual Directors' Institute on Corporate Governance --
themed, "What Board Members Need to Know to Be Effective Today and
Tomorrow." Weil Gotshal's Ira Millstein is chairing the conference,
with corporate directors Betsy Atkins and Richard Koppes as co-chairs.
Sessions will be held at the Crowne Plaza Manhattan Hotel. To register,
visit
October
17-19, 2004
The National Association of Corporate Directors (NACD) presents its
2004 Annual Corporate Governance Conference at the Renaissance
Mayflower Hotel in Washington, DC. To register, visit
October 21-22, 2004
The International Corporate Governance Network, in conjunction with the
Weinberg Center for Corporate Governance at the University of Delaware,
conducts a program on "U.S. Corporate Governance Reforms: A Global
Perspective." Panels will discuss such topics as: "Can Institutions
Really Act as Owners?"; "Can Directors Really Represent Shareholders?";
and, "Executive Remuneration -- the Intractable Governance Dilemma?"
The conference will be held at the Hotel duPont in Wilmington, Del. For
more information and to register, visit
BoardSource, formerly the National Center for Nonprofit Boards,
presents its Leadership Forum, themed "Challenge Your Board Practices."
Discussions will include: how effective are boards?; what is the future
of nonprofit leadership?; what does it mean to lead?; and, do your
board committees have "static cling"? Register at
The Directors' Education Institute at Duke University is an intensive two-day program developed by the Duke Global Capital Markets Center with the support of the New York Stock Exchange. With participation from leading executives, corporate directors, policymakers, and experts from the legal and financial services industries, along with academic authorities from the Fuqua School of Business and Duke Law School, the program will teach participants how to develop a framework for making informed board decisions and exercising sound business judgment. For additional information, visit
What's New
at Directors & Boards
Directors & Boards and the National Association of Corporate Directors (NACD) will again collaborate on a Boardroom Briefing in Spring 2005, focused on the critical issue of succession planning. Distributed to nearly 20,000 directors, CEOs, CxOs and top corporate governance professionals, the "Boardroom Briefing: Succession Planning" will look at how boards are planning and preparing for changes in executive leadership in light of shareholder interest in corporate governance, transparency and investment growth.
If you're interested in contributed editorially to this important publication, please contact David Shaw at 301-963-6162, or by email at dshaw@directorsandboards.com.
If you market to directors and corporate governance professionals, there's no better place for your advertising message. For more information, contact Scott Chase at 301-879-1613, or by email at scottchase@verizon.net.
The Art of Corporate Governance
Directors & Boards'
new book, "The Art of Corporate Governance," is now available for
purchase. The book features 10 of the finest articles published
in
the journal from the past 20 years and focuses on the role of
directorship. Authors include Norman Augustine, Chuck Ames,
William Miller III, Robert K. Mueller and Murray Weidenbaum. For
more information and to buy a copy of the book, click here.Directors Guide: Corporate Aviation
Directors & Boards' First Quarter 2005 issue (available to print subscribers only) features our Directors Guide to Corporate Aviation. Whether your company is large enough to field its own fleet of corporate jets, or whether you're looking at fractional shares to move your executives quickly, this Directors Guide will offer a punchlist of board-level questions: What's the most cost-effective approach? How can the case be made to shareholders that corporate aviation is a worthwhile investment?
Your question is appropriate for any number of high tech or "new economy" companies, who might not have enough people who have lived through the kinds of experiences that "mature" industries have faced. And although I would not presume to comment on the experience of the individuals involved in the Google IPO, some general comments are worth considering.
First, people learn serious lessons from living through a few business cycles. From my experience in the toy industry, it is easy to cite examples of companies that fell victim to their own successes. A "hit" product brings in revenues, management responds with increased manufacturing, marketing and other capacity, and then revenues decline precipitously just about the time the new leases and employees are hitting stride. Many high tech companies are on the front end of that curve, with plenty of capital and potential, but perhaps not enough attention to conservation of those assets.
Second, just as I always believed a few bankruptcy filings would help educate young transactional attorneys about how their contracts might someday be construed, so it is with high tech executives who have not lived through leaner days. Having a few people around who have had to worry about collecting receivables and managing payables could be helpful to a high tech company -- before it is too late.
Finally, from a corporate governance and compliance perspective, people who have been through a few cycles know that risk management and prudent compliance initiatives begin long before the investigations start. The investigations always trace back to the beginning, and management's actions before the events in question and their responses to events as they unfold are judged in perfect hindsight.
In short, as you point out, the scars of those who have been through the battles show wisdom and experience -- and hopefully lead to enough resolve to maintain control of high tech companies early in the game, when the dollars are flowing freely.
Steven R. Andrews
Senior Vice President Law and Human Resources
ShopKo Stores, Inc.
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Directors & Boards e-Briefing is a monthly service of Directors & Boards. All contents copyright 2004, MLR Holdings LLC.