Having Safe, Sane, Sensible And Scrupulously Fair Rules Of Conduct In Place… Plus, The Very Important Tip Number-Two
On March 1, the inimitable Broc Romanek, Editor of The Corporate Counsel, hosted his annual webcast on prepping for the upcoming Annual Meeting Season, wherein both he and your editor opined at the outset that smart companies ought to be doing a bit more thinking than usual about Meeting Security…given current hot topics like corporate political contributions, lobbying, pay disparity, attacks on collective bargaining arrangements, heated political elections…and the “Occupy Movement” – which, that very week, received significant new funding from Ben & Jerry, and which, as panelist Bob Lamm of Pfizer noted, was picketing outside his building that very week.
While noting that problems with security at shareholder meetings are few and far between, “Your own meeting is the only one that really counts” we reminded, so “Hope for the best, but prepare for the worst, to make sure that ‘Annual Meeting Meltdown’ does not become the flavor of the month” advised.
Your editor also opined – based on his attendance at literally hundreds of shareholder meetings, over 40+ years – where more than a few went dangerously off the track – that the very best “safety precaution” one can take is to have clear and well-thought-out Rules of Conduct for the Meeting (not ‘rules of procedure’ btw – which are very different things)…and to be sure that everyone has a set of the rules (we actually like to have them placed directly into the hands of each registrant)…and that the Chair of the Meeting briefly reviews them with the audience before the meeting open for business.
The most important Rule for a safe and sane shareholder meeting – by far – is that the Chairman must always be in charge: If he or she loses control, the meeting will, almost certainly, quickly dissolve into anarchy – and maybe end with an actual shareholder revolt. Thus; an equally important corollary; the Chairman must be prepared to enforce the Rules, after ‘fair warning.’
We promised the 1,500 or so folks who’ve listened to the webcast to date that we would post a revised set of model rules, which you will find below…along with a bit of commentary:
We wish we could claim authorship of the original version, whose origins are lost to history as best we can tell. But clearly, it has evolved over time – to take account of cell- phones and blackberries for example. But it will be even better, we think, with a bit of additional customizing for each company’s specific situation in any given year.
The modifications that we have made are meant to provide a template for outlining sensible – and scrupulously fair rules – that are meant to keep the meeting within “reasonable time limits.”
Equally important, we think, the Rules are designed to limit the number of times – and the total time – that any single attendee should be allowed to have…to a “reasonable amount.” This is to ensure that all attendees will have a fair and “reasonable chance” to ask questions and it also helps to prevent gadflies or potential troublemakers from co-opting the Meeting – which, invariably, creates unrest – and often causes outright anger to erupt – which is not a good thing.
Please note that most years, most companies will not need to have strict time limits like those suggested in items 8 and 9. Especially worth noting in this regard is that every company is different, and every year is likely to be different too – depending on the number and nature of the proposals up for a vote, developments in your industry or in the general economy, or in the press. So what is “reasonable” in one year may not be as reasonable in other years.
Our template follows the longstanding Delaware precedent that the main business of the meeting is to accomplish the official business of the meeting; specifically the election of directors and the voting on any management or shareholder proposals that are “properly brought before the meeting.” We realize that there are different views on this subject, and that some years, departing from this format may be appropriate. But in our long experience, holding general questions until after the “official business” has been accomplished is not just a major time-saver, it provides a much better and clearer focus on each issue of business – whether it is on the ballot or not.
We also believe that the Chairman of the Meeting, or maybe the CEO, ought to make some brief remarks about the past year, and the year ahead, so please do put this on the Agenda. Doing so right off the bat tends to set a good tone – and often answers questions that might otherwise come from the floor. The old-time tradition of making these remarks “while the votes are being tallied” doesn’t make much sense these days – especially since we believe it is best to summarize the outcomes rather than rush to report the final numbers. But the main takeaway here, is that every company should have “reasonable” rules of the road for the Meeting – and should be sure to provide “reasonable time” to satisfy attendees – and should design the agenda with the current year’s circumstances, and the “hot topics” if any, very much in mind.
It is also worth noting that there is a built-in “self-governing factor” for Meeting conduct these days: A company is acting very much at its own peril if it tries to cut short questions, comments or debate on matters that are important to shareholders. And if the meeting is being broadcast live, on the web – and maybe being archived for every interested party to experience for themselves, the damage to corporate reputation can be severe, and long- lasting. So at every turn, the question should be, “Will the time limits be perceived as ‘reasonable’ ones under the circumstances – by proponents, by other shareholders and by the company’s important stakeholders?”
Readers will be very well rewarded, we think, if they read the transcript of Broc’s webcast – which featured a truly stellar cast of professionals from public companies; specifically, Kathleen Gibson of Campbell Soup, Bob Lamm of Pfizer Inc., Barbara Matthews of SCE Corp. and Carol Ward of Kraft Foods – who provided a veritable feast of insider insights on things to consider as you plan, and some highly practical tips.
We have also posted a summary of the top-ten tips on dealing with activist investors, proponents and gadflies that emerged from the webcast – and from your editor’s personal observations over many years at often contentious meetings – below.
And just as a reminder, we have two articles that treat Annual Meeting Security and Meeting Admission Criteria at much greater length on our website, www.optimizeronline.com.
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