Regular readers are well aware, we hope, of our frustration with the overall presentations of shareholder meeting and voting materials over the web. Much as your editor would like to sign up for e-delivery only, most of the online materials we review are so reader and browser unfriendly we are forced to insist on paper copies, since it’s an all or nothing proposition where the delivery options are concerned. In any event, we are absolutely convinced that poor-quality e-materials are a major cause of the annual declines in individual investor voting we have been seeing - ever since Notice and Access was adopted.
But finally….and Hurrah! Microsoft Inc. has hit a major set of high notes - with shareholder meeting materials that are truly designed with web-readers - and voters - in mind. Go to their investor-pages on the web, we urge you, to see for yourselves what can be done to clarify and simplify a proxy statement - and to turn it into something that people will not only read, but act on. Then, please, vow to work on your own materials for 2016.
And here’s three cheers for the Council of Institutional Investors, which asked all of its members for “exemplary disclosures about engagement policies and practicesfrom U.S. or non-U.S. 2015 or 2014 proxy statements” Then they held a roundtable on best engagement practices and produced a whitepaper in December that can be found on its website (Required reading, we say.) They also produced a report, “Best Disclosure: Company-Shareholder Engagement” that cited eleven companies as having “noteworthy engagement disclosure”: Allstate, Chevron, Coca-Cola, Concert Pharmaceuticals, EMC, Ford Motors, Manulife Financial, PepsiCo, Prudential Financial and Weatherford International.
We looked at the CII’s summaries of the 11 winners’ engagement practices, and Chevron, Inc. was far and away our favorite. Here’s Chevron’s own introduction and summary of its engagement policies and procedures: “Your Board believes that fostering long-term and institution wide relationships with stockholders and maintaining their trust and goodwill is a core Chevron objective. Chevron conducts extensive engagements with key stockholders. These engagements routinely cover governance, compensation, social, safety, environmental, human rights, and other current and emerging issues to ensure that the Board and management understand and address the issues that are important to our stockholders.”
And here’s the CII’s summary of the high-points: Chevron “discloses a general policy on its engagement philosophy and the number of engagements with shareholders in the previous year. Chevron reports that an engagement team consisting of senior executives, subject matter experts on governance, compensation and environmental and social issues, and, when appropriate, its lead independent director, held more than 40 discussions with shareholders representing more than 30 percent of the company’s common stock outstanding.
More broadly, the company says it has developed and follows an annual plan and process to map out its engagements and to proactively address important issues. The plan and process are overseen by an engagement steering committee composed of senior executive officers. Chevron also discloses that in the previous year, the engagement team met with many of the proponents who submitted shareholder proposals to discuss their concerns. Any feedback gathered by the team was shared with the board and its relevant committees.”
Another best practice that caught our eye was a press release from Hasbro, informing the world that they would discuss their plans for 2016…at the 2015 Annual Meeting. Wow! We haven’t seen a move like this in 25 years. And what a great way - with their Star Wars toys set to soar to the moon and further in 2016 - to make the Annual Meeting into a meaningful event…as we have been advocating basically forever…
This prompts us to remind readers about our own “Checklist of Best Practices to Gear-up Early for Your Annual Meeting of Shareholders” - And also, further on the subject of shareholder engagement, “What Should Corporate Folks Be Doing to Prepare For, and Ideally to Avert, Activist Knocks on Their Doors?” The articles - and nearly 100 others on Annual Meeting Planning - are on our website: www.optimizeronline.com
And now…for the WORST shareholder oriented materials to cross our desk in 2015… “The VWAPs of GE”
General Electric - which normally gets high marks for sending reader-friendly materials to shareholders - sent us this November one of the most poorly written, poorly organized and totally confusing prospectuses we have ever seen…to let us know that “General Electric Company Offer[s] to Exchange Up to 705,270,833 shares of Common Stock of SYNCHRONY FINANCIAL….Which are Owned by GE Consumer Finance, Inc., a subsidiary of General Electric Company for Outstanding Shares of Common Stock of General Electric Company.”
Yes, the deal was confusing to begin with - especially to people who don’t read the financial pages with complete concentration on the minutia - and even more so to people who don’t know they do, or did, or maybe will own Synchrony Financial - or maybe GE Consumer Finance, however they fit in. But this sure raised a lot more questions than it answered.
And OUCH! What’s with the weird mixture of capital vs. lower case letters, reproduced above, which added another crazy-quilt of dizzying elements for readers trying to decode the meaning here. And where was the Letter of Transmittal in case we decided to do something?
Then came a seven inch block of densely-packed italic type [like this]detailing even more confusing details as to the possible exchange rates, and little tidbits like this: “The indicative exchange ratio that would have been in effect following the official close of trading on the NYSE on October 16, 2015, based on the VWAPs of GE common stock and Synchrony common stock on October 14, 15 and 16, 2015, would have provided for 0.9746 shares of GE stock to be exchanged for every share of GE common stock accepted.” Then, after about three inches more of tiny italics like these, came the advice to “See ‘Risk Factors’ beginning on page 27 for a discussion of factors that you should consider in connection with the exchange offer.”
Gee, GE…a little up-front explanatory note, in plain English, could have explained the deal a lot more clearly, and saved at least three re-readings of the first few lines of the prospectus…which still does not explain the deal to the average non-MBA, even if she or he is willing to read further.
Even with an MBA, one had to rummage through the entire 96-page thing to find what most people wanted most to know: This, we discovered, was addressed in Question 27 on page 9: “What if I want to retain all of my GE common stock?” - Or a better and more important question, we’d say, that was NOT there: “What happens if I throw this prospectus in the trash and do nothing further?”
The payoff line?…Ta-da… “If you want to retain your GE common stock” [instead of GETTING Synchrony stock, a possibility (?) they failed to make clear up-front, if indeed it was a possibility] “you do not need to take any action in connection with the exchange offer.” What a terrible waste of investors’ time - and patience - and money! And why did we get this in the first place?
Finally, we hope you are wondering; What’s a VWAP? It’s the volume-weighted average price. And dat’s a vwap on dis dismal mess.
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