Reader Alert: “Endemic Sloppiness” In 2024 AGM Materials

As most readers know, we think, our ‘sister company’ – CT Hagberg LLC - fields a team of 45 expert Inspectors of Election who, through July, will have served at well over 500 companies. This – plus your two editors’ own stock portfolios – causes us to monitor over 700 AGMs a year.

This season, we were literally bowled over by the large number of flubs we encountered. The most common cause seems to us to be the unusually high number of “newbies” – both on the company scene – and at many of their key service providers too, like at transfer agents and, especially, at their outside counsel. The “old systems” of on-the-job training, careful succession-planning, careful mentoring – and close supervision by experienced pros – seem to us to be largely things of the past. But also, as you will see below, the old-time traditions of planning way ahead for the AGM – and striving for perfection, every step of the way - also seem to have gone by the boards at many companies. Most of the time, the blips are discovered in time to fix or work around them – but not always, as you will see:

One of the first things we noticed - as still avid readers of Proxy Statements - and mostly-faithful voters – and eager attendees at VSMs where we own shares and can squeeze in the time – was how difficult it was to find the correct date and time of the VSM – and how hard it was to find the link to the meeting in so many cases. One has to conclude that most companies don’t WANT us to tune in.

Worse yet, we encountered several instances where the times and dates were at best incomplete, and in several cases, FLATLY WRONG! Berkshire Hathaway’s Notice of Meeting – normally a model of clarity and helpfulness - gives the date and time on page-one as May 4, 2024 at 4:00 p.m. – which we duly, and a bit dumbly noted, we admit – and only noticed the mistake when we began to see some highlights being broadcasted on our iPhone in mid-morning. We missed the meat-of-the meeting entirely. CHARGEPOINT HOLDINGS, INC. posted the meeting time on its VIF as “11:59 PM ET” when they really meant “AM ET” – and could have been far better saying “12:00 noon, Eastern Time.” AMAZON.COM billed their meeting as “9:00 a.m. Pacific Time”– totally heedless of the fact that most likely, way more than 50% of the potential attendees are on Eastern Time - or maybe slyly flipping us easterners the bird? Were they looking to save a few keystrokes in the Proxy Statement, where there was plenty of room for them – or a few ounces of ink on a multi-million-dollar printing and mailing bill?

Another major observation this season was the unusually large number of instances we encountered where there were differences – sometimes quite substantial ones - in the number of “Votable Shares” reported in Proxy Statements vs. the numbers shown as “Shares Outstanding on the Record Date” as shown in the once “certified” lists of shareholders produced by transfer agents. And often, we encountered different numbers entirely in the reports from proxy tabulators. Our Inspector Team has a policy that requires our Inspectors to investigate here and to satisfy ourselves as to the correct number to use in the Final Report on the Voting - which is filed with the SEC. Most often, the differences are due to option exercises that took place shortly before or shortly after the official record date, But, we ask, “Who is in charge of the SEC-required “Control Book” at the Transfer Agent? And who is responsible for monitoring the numbers at the Company - and for making sure that the required entries are actually made on their “Cap Tables”…  AND for assuring that differences are properly reconciled?

The most disturbing thing we saw this season was the fact that many Transfer Agents are not officially certifying and signing the legally required list of registered shareholders. (Maybe because they themselves are ‘not in proof’?) And at least one TA is not including CEDE on the list of registered shareholders! (We think it’s to hide the fact that ex-Cede, “registered holders” hold a totally immaterial number of shares, about 90% of the time.) But this is definitely NOT what is required for a proper review of the records by the Inspector of Election– and is NOT the kind of list that is required to be open for inspection by registered shareholders themselves at all U.S. Meetings of Shareholders.

One last thing we noted – the surprising number of times that issuers got totally wrong advice from newbies at their outside counsel. To cite just one example, we had a case where we presented our draft documents in advance, as usual, and were told re: the draft Ballot of Appointed Proxies [sometimes known as the “Master Ballot” whereby the proxy holders legally CAST their votes] that “our outside counsel says we do not need this.” “Don’t try telling that to a judge,” we said, citing the landmark case where the judge ruled, as most experts already knew, that “proxies are not votes” until the Proxy Committee votes them by BALLOT. (Bad as this was it still doesn’t top the case, a few years ago, when an attorney for one of the most famous law firms in California insisted that the votes that had been recorded for a Director who dropped out at the last minute should be simply “transferred” to the replacement – then – even stupider – he advised them to write and mail a new proxy statement - when the company could have appointed a new director with no fuss and muss - and without spending an extra dime - right after the AGM, where he or she could have served without a shareholder vote until the next AGM.)