An Early Look At The 2013 Annual Meeting Season

Our top  -  two predictions: (1) More investors will demand more face  -  time with CEOs than ever before—before, during and after the shareholder meeting…and (2) Low voting support for management positions will turn into much higher drama than ever before—at shareholder meetings—and at board meetings too.

Every year around this time we try to take a stab at predicting the way the next year’s annual meeting season will shape up—and what the hot issues will be.

The first prediction is a fairly easy one to make, given the theme of our annual magazine—and given the recent report from the Wall Street Journal: “Investors Demand CEOFace Time”—citingthegreatlyincreased demand for face  -  to  -  face encounters by investors of every stripe. But when it comes to Annual Meeting Planning time—which is NOW—we’d add, “Be prepared for A  -  M attendees to be better prepared and far more confrontational than ever when it’s time to introduce the proposals—and during the question period as well.”

Our second prediction follows logically, as night follows day: Directors are antsier than ever - and pay much more attention to the actual vote than ever before: As we warned two years ago, “80 is the new 50 when it comes to a safely passing grade with investors”—and Directors are really taking note.

Do we think that we will see the 99  -  percenters, “occupiers” and the “pay your fair share of taxes people” back in the same numbers we saw last year? Actually, no. But when they DO show up, we expect them to be better organized, and better armed with better questions, and to come out in larger force at the companies they decide to target than ever before. And as we’ve also reminded, over and over, the averages don’t mean a darned thing to smart corporate people: The only shareholder meeting that really counts is your own.

Do we think that “activist investors” from the public pension and social investing worlds will be back in bigger force in 2013? Here, we DO. Interestingly, the WSJ article   -   citing evidence that investors who’ve “looked the CEO in the eye” have significantly better investment returns than those who haven’t—is exactly the same argument that shareholder proponents—and we too— have been making for some time now. It really isn’t about getting secret “insider information”—although some savvy investors DO hire ‘body language experts’ to ferret out evasive or misleading or outright false info that CEOs and CFOs may give away—with what really good poker players call “tells.” The fact is that you CAN often spot the good guys—and smoke out the bad guys—just by watching them—to see if they CAN look people in the eye.

Do we think that companies that fail to “REALLY Reach Out to Investors” will pay a very high price for such failure? Actually, some will get a ‘free pass’ we think, so activists can focus on the ripest targets. One of our clients said she totally struck out in her “reaching out efforts” with most of last year’s naysayers on S  -  O  -  P who seemed to have much bigger fish to fry than hers. But heaven help you if you are in the cross  -  hairs of key activists and fail to really reach out, we say.

Do we think that more companies will be taken totally unaware by activists this year? Absolutely yes: In part it’s because activists, having had their way with most big companies, are working their way down the food chain to mid  -  cap and small companies who are easily taken unaware. In larger part it’s because we think the most basic human instinct is not for food, or shelter or even sex   -   it’s the instinct to believe that everything is “OK”  -   even when the evidence is to the contrary   -   until they see the blood starting to flow. And even then, many try to apply a band aid when maybe a tourniquet or some major surgery is needed.

So with this intentionally vivid imagery in mind, we would urge you to start planning NOW—and to follow our long  -  cited Annual Meeting Rule: Hope for the best— But always plan for the worst. To get you started we offer a list of articles with very practical planning tips below — all of them available on our website.