Early Returns From The Annual Meeting Front: Spring-Season Has Just Begun – And Ill-Winds Are Blowing

Pity poor Citi – whose top management team – and board – were taken totally by surprise when the Fed refused to allow Citi to increase the quarterly dividend from a measly penny a share and to buy back shares to prop up the stock – as everyone, including  the investor community, was confidently expecting – and where the bombshell dropped just a few weeks before Citi’s annual meeting.

And we pity the good folks at Coke – where the very same week an analyst took exception to Coca-Cola’s Compensation Plan, and got extensive coverage in the press – also just weeks before their annual meeting, where Coke will want to ratify its Say On Pay proposal with a respectable margin, as all companies do.

If this was not enough to send shivers down the spine of annual meeting planners - at the very time a big political debate on income inequality is ramping up, with November elections in mind - and companies are looking for positive Says on Pay - a New York Times column by the estimable Floyd Norris drew prominent attention to the fact that “Corporate profits are at their highest level in at least 85 years. Employee Compensation is at the lowest level in 65 years.”

Meanwhile, as a big 3/19 New York Times article discussed in detail, institutional money managers like BlackRock, T. Rowe Price and Vanguard have changed their old, basically pro-management proxy voting playbooks – and (surprise?) are quietly being consulted by the “old-time activists”… long before they fine tune their own playbooks to shake up below-par performers with proposals to spin-off or divest assets or to shake up the board with new candidates of their own choosing – a la the recent swift and smooth move on little ol’ Microsoft Corporation. “This is the biggest shift in the battle for corporate control since private equity was invented in the 1980s” the head of “corporate preparedness” at Lazard told Norris. And as the head of M&A at Goldman Sachs told Norris, to end the article with a clearly understated bang, “the boundary between long-only money managers and activists is starting to blur.”

Until these ill-winds began to blow, we had been predicting a fairly quiet 2014 Annual Meeting Season – ex that fairly big handful of targeted “underperformers” – like Abercrombie and Fitch, Avon Products, Darden Restaurants, McDonalds, Mondelez and Yahoo and the usual crop of smallish banks that raiders like to raid – but now we’re not so sure.

Time to repeat our annual Annual Meeting mantra, dear readers: Hope for the best…but prepare for the worst.