To get a good idea of how to run a well-run, shareholder-friendly and useful VSM, start, we say, with our run-throughs of this year’s VSMs of last year’s winners - UnitedHealth Group and UPS…
UNITEDHEALTH GROUP’s Board Secretary Dannette Smith once again guided us smoothly and swiftly through the business part of the meeting, which began promptly at 8:00 local time, 11:00 Eastern - preceded by a photo of a beautiful blue sky for early-birds to look at, some jaunty march music, with happy horns and trilling flutes quietly playing in the background, and a nice welcome from a very well-spoken announcer from Broadridge-partner Chorus Call, which flawlessly managed the call-in process and the “audio” for speakers and shareholder proponents.
When the polls opened at 11:05 there were 83 attendees - who grew to 99 by the time the polls closed at 11:14. Adhering to best practices, the company took questions on the proposals and allowed ample time for general questions during a separate Q&A period once the business of the meeting was done. There was just one question on the proposals (whether the metrics for CEO pay were changed due to Covid: No).
Chairman Andrew Wiffy’s remarks on the business, and his responses to the relatively few questions received (No expertise on Voting Rights issues - but full support for employee voting) - and on “Increased use of Algorithms and A-I” (increases in investments but high reliance on physicians and clinicians) were crisp and on-the-money.
The meeting was all done in a nifty 28 minutes - without a single glitch, or any rushing at all - and with more than ample opportunities for shareholders to participate in the Q&A. Just over 2 million votes were submitted at the meeting - an unusually high number, indicating more-than-usual shareholder engagement via the meeting app, we’d say - but basically immaterial vs. the roughly 854-hundred-million shares that were voted in total. (Last year there were only 62 attendees, so a nice uptick, and a really negligible number of votes cast at the meeting.)
Do bear in mind, of course, that companies that normally do well on the business side usually have the best and smoothest meetings - and usually the fewest number of shareholder proposals - and the fewest number of “other issues” to deal with. If your company is not like this, start preparing extra-early - like now, we advise.
The UPS Meeting Was Also An Exemplary One Again This Year:
Roughly half of all the meeting matters to be covered had been pre-recorded, and UPS again followed a detailed written playbook - and conducted a full “all-hands dress rehearsal” that made clear exactly who was to do what - and exactly when - which allowed everything to run like clockwork.
Precisely at 8:00 a.m. a telephone operator opened up the phone lines for all key participants, welcomed everyone politely, and clearly, then turned the meeting over to UPS Investor Relations Officer Scott Childress, whose opening remarks, introductions of all the key participants and a quick review of the agenda were entirely pre-recorded. Then he turned the meeting over to the Non-Executive Chair, whose opening remarks, and the intros to the first four items of business had all been pre-recorded too. Then he went “live” for the introduction of the five shareholder proposals, two of which were presented live, over the phone, two of which were presented via pre-recorded statements and one - where the proponent was unable to call in at the appointed time for some reason - was introduced by the Chair. There were five shareholder questions on the official business, which was formally concluded only 28 minutes into the meeting.
Next came “the closing of the polls” - with brief instructions on how to vote or change a vote if desired, then a pause to allow final voting. Then the official closing.
Then, the Inspector of Election (full disclosure; your editor in chief) delivered the Preliminary Report on the Voting (another best practice in our opinion, to have the IOE do this) then came the formal adjournment and a “transition to shareholder questions [where] we have received several hundred questions and have categorized them into various topics [and] will do our best to address all of the topics raised” - and an invitation to “contact Investor Relations if anyone submitted a Q that we did not respond to.”
We counted 16 topics, all of which struck us as good and mostly “probing” ones - with “politics” and political contributions - and “sustainability” as “top of mind.” The Chair answered all of the governance-oriented items, and Carol Tomé, the CEO, answered the business-oriented Qs - all very thoughtfully and thoroughly we thought. Interestingly, there were 106 shareholders on the line at the start of the business portion and the audience grew to 113 by the close of the general Q&A. The meeting concluded, with pre-recorded closing comments by CEO Tomé at 8:52 - comfortably ahead of the scheduled time.
Another Excellent VSM - Which We Failed To Report On Last Year - Was Verizon’s May 13th Shareholder Meeting:
Corporate Secretary Bill Horton smoothly introduced the three usual management proposals as he did last year, asked if there were questions or comments on each one (there was one, on total CEO pay in 2020 vs. 2019) and disclosed the preliminary votes on each item as they came up, which is a very nice thing to do in our book - as long as there are no close items and where the likelihood that votes at the meeting could change any outcomes, even in a small way, is statistically zero, as at Verizon.)
There were three shareholder proposals; one on Written Consent from Ken Steiner, one on Clawbacks, from the Bell-Tel Retirees, where there was a question submitted on what IS “misconduct” in this context, and one from retired employee Jack Cohen, to Expand Shareholder Approval of Equity Awards, with no questions raised.
During the general Q&A that followed, we counted a dozen of them - on topics like a dividend increase, Executive Comp design, “Stakeholder Capitalism and Shareholder Balance,” the “Digital Divide,” the Verizon Brand, Stock Ownership Guidelines, Vaccination Policies, Assessment of Board Effectiveness, Media and Entertainment and plans for expansion/contraction there - with the business Qs answered very thoughtfully by the Chairman & CEO Hans Vestberg and the Governance Qs fielded fully and ably by Horton: A very robust 28 minute Q&A period and a very timely adjournment by 10:51.
A very interesting observation - which your editor was able to see as the Inspector of Elections - shareholder attendance, which began at 218 - continued to climb steadily as the meeting progressed - reaching a peak of 270 by the time the meeting ended after 51 minutes. Usually, attendance tends to drop steadily during the Q&A period, unless there are fireworks (none here). Also, only 47 attendees - of Verizon’s roughly 1 million retail holders - voted at the meeting (where there used to be box-loads of proxy cards at the in-person meetings) casting around 55,000 votes of the 3.46 billion votes (!!!) cast in total.
ANOTHER BIG WINNER WITH US THIS YEAR - COCA COLA: We visited the “Audiocast” especially to get some insight into a VSM that was powered by Computershare technology and staff, and came away very impressed indeed: 46 minutes of fact-packed content, including a very robust and enlightening Q&A period - although we would have liked to have seen an added call-in option for a company with as many individual investors as Coke has.
Chairman and CEO James Quincey opened the meeting with a pre-recorded statement - delivered in a very crisp and clear British accent - and with excellent audio quality - the best we’ve heard to date. They also provided a very nifty technological touch - closed captions - that worked to perfection and kept up perfectly with the spoken words.
Like most of the best VSMs we’ve found this year, the company did an excellent job of leading off with most of the most pressing ESG issues in their business segments - beginning here with Diversity and Inclusion, actions to decrease Packaging and to increase Recycling - and Coke’s special 5×20 Outreach to create job opportunities for women. He also noted Coke’s 135th anniversary. Cheers for that!
Corporate Secretary Jennifer Manning moved briskly through the four items of business, and noted [the Best Practice we say] that the polls would be open until the conclusion of the Q&A period - introducing the three usual ones - Director Elections, SOP, Auditor Ratification - then introducing the proponent of a shareholder proposal calling for a report on Sugar and its Effect on Public Health, where the proponent noted “the high negative impact that sugar has on people of color” and said that Coca Cola “gets a failing grade.” Chairman Quincey gave a fulsome response we thought, on company commitments to reducing sugar, year after year, and noted that no added information is needed, in light of the extensive info published annually by an international, independent non-profit authority, AccessToNutrition.org.
The first question during the general Q&A period came from a former Coke employee - familiar to many of our readers, we know - Karen Danielson, Coke’s former manager of shareholder relations. She asked a question that most companies are wrestling with these days; if corporate engagement in political activities - like “making political contributions, or deciding whether to say more, less, or nothing about political issues” - is “worth the risk” - which the chairman answered, as one would expect of pre-asked questions, in a thorough and thoughtful way.
Much as we love to hear totally unexpected questions over an open phone-line - and the way they are answered - we must take note of how much the questions sent in in advance contribute to fuller, more precise, more succinct, more thoughtful, better-worded and far clearer answers.
Quincey acquitted himself brilliantly on every item, fielding additional questions on the business impacts of Covid, Diversity, Inclusion and Equity, providing a brief but fact-filled report on PLASTICS, and Coke’s very high and ambitious goals for re-using, recycling, reducing the use of virgin plastics. He ended on a very high note with us - and with other long-term investors too we’re sure - by stating that after considering expenditures to maintain and grow the business, “growing the dividend” was Coke’s number-one priority…with share repurchases their last priority. AAA+ with us.
PEPSI vs. COKE: After our review of the Coca Cola VSM we figured we should catch up with Pepsico - which has long been one of your editors’ best performing investments - but which, sadly, revealed a surprising number of mostly minor but annoying glitches - and one big faux pas near the end.
The Pepsico meeting re-play was preceded by a brief snippet of Baroque Processional Music - which normally we love, but which was scratchy-sounding, and which cut off abruptly. Then came a recital of the stultifying SEC disclaimer language, and here, the sound had a hollow, echoing quality, all of which started us off on an off-note.
Chairman and CEO Ramon Laguarda opened the meeting with a pre-recorded message - no video - no photos - but with a very upbeat report on the surprisingly good growth during the pandemic, with an even better uptick in the 4th quarter - all of which he attributed to Pepsi’s wide-ranging “Creating More Smiles” initiatives. Way cool! His Spanish accent came as a nice surprise to us too - and a reminder of how important a “global perspective” really is these days. He too did an excellent job of touching on the hottest ESG issues in their biz upfront - their “Racial Equality Journey” that he said would favorably impact 500 million people and “reduce systemic barriers to economic opportunity” - their worldwide commitment to “sustainable agriculture” and to reducing greenhouse gas - getting to net-zero emissions by 2030 - 10 years earlier than the world-wide goal - and to use 100% recycled plastics by 2022! Wow!
Next, he introduced Pepsi’s EVP, GC and Corporate Secretary who reviewed - in a nicely plummy British accent - “How to Vote on the app” then urged listeners to submit questions early and to include their names and affiliations and then to say, “one question or topic per shareholder” - which seemed needlessly restrictive to us as long as the total meeting time was still within bounds. (A quick aside: British accents were almost as common, and as welcome this year as was the unusual abundance of women speakers last year, and again this year, at truly excellent VSMs.)
Then - oh woe - news that the polls would close as soon as all the proposals had been introduced; A bad - and totally unnecessary rule.
And then, when it was time to introduce the first shareholder proposal on reducing the threshold to call a special meeting, Jim McRitchie, who was representing Ken Steiner - there was dead silence for 15-20 seconds, where normally an “operator” - or someone would say without prompting, “Mr/Ms X, the line is open.”
McRitchie urged the company to keep the polls open for a “reasonable time” and that failing to do so “made shareholder participation “meaningless” - which we must emphatically agree is true.
The second proponent, on “Sugar and Public Health” also experienced a long silence before realizing that she was on the air. And, even before the 20 second warning that her 3 minutes would soon be up, she raced through her speech and had to wrap up abruptly. We think she deserved a “credit” for the phone delay - and also, that so strictly enforcing a slim 3-minute limit on speaking about complex issues is unseemly - and comes across as downright rude. (Readers, please see our advice on dealing with speakers and wannabe speakers at Shareholder Meetings. Treating them with kindness, and graciousness, and cutting a bit of slack is a “winning tactic” in our long experience. And, after all, they are share owners - who are entitled to consideration - and NOT to a rude-boot!)
The third shareholder proposal was on “External Public Health Costs” - and here again, the proponent had to break a long silence by asking, “Am I on?” - and then had to rush her presentation, and go faster yet at the 20-second warning. But then - a huge breach of meeting etiquette in our book - and a breach of the Rules of Conduct by the company itself, in our book - when they cut her off at 3 minutes, then took 3 1/3 minutes to rebut.
To their credit, the company took pre-submitted questions on board size and composition, targeted payouts vs. performance goals and “reputational issues” surrounding KPMG audits, and auditor rotation, which basically they dodged…Then, thanks to Jim McRitchie, they kindly asked if there were additional questions - and left the polls open for about 26 seconds more - which allowed the nimble-fingered listeners among us a “reasonable time” to change any of their votes if desired.
But in the Coke vs. Pepsi VSM faceoff? AAA+ for Coke and a B- at best for Pepsi - and maybe even a “non-gentlemen’s C-minus” where respect for shareholder attendees is concerned.
The Citigroup Meeting: Worth A Listen For Flubs To Avoid, Very Good Q&A Periods And - Especially - For A Star-Turn By New CEO Jane Frazer
We wanted especially to attend the Citigroup Meeting this year, and to cast our votes - partly to test the technology and the way Citi used it, but largely to check out the brand new CEO. So we tuned in extra early. Good thing we did! The URL we used brought up so many unrelated sites we were completely buried by them. (Maybe our fault for choosing the wrong search-box? Or browser?) So at 8:49 we started again and found the right page. We entered our control number, as prompted - but No Good! We tried again, eliminating the spaces between the numbers and we were in at long last, only to be greeted by horrible guitar-and-sax music with a maddening tick-tock beat. Over and over. Yech! Then, mercifully, a segué to slightly less annoying keyboard/xylophone music to fill the 10 minutes ‘til show-time.
The Independent Chair ran through the agenda, mentioning the other attendees - CEO Frazer, the GC and Corp. Secretary, KPMG partners and the IOE - none of whom, except for Fraser, ever said a single word!
Then he noted, weirdly, for sure, that “Recording is prohibited.” (How could one possibly prohibit or prevent this at a VSM? And…DUUHH…a recording is indeed available to all comers - courtesy of Citi - if they search hard enough). Then…a long period of dead air, making us fear we had been cut off completely. Jane must have missed her cue to begin giving “The State of Citi” - and actually, there was no cue that we heard. So far, we thought, an awful lot of rookie-errors, and a lot of sloppiness in the overall meeting drill.
Once unmuted (or could this have been pre-recorded?) Frazer began her remarks in a crisp and highly audible and highly understandable British accent. She cut straight to the chase in no-nonsense fashion: A commitment to have all clients at net-zero emissions by 2050; “Systemic Inequity” as a worldwide problem, where they had committed $1 billion to “Action for Racial Equality” in partnership with the Urban League, and described Citi as “an anti-racist institution.” Then - beautiful music to the ears of long-suffering investors - remarks on “Closing the return gap with peers” and the need to “Modernize infrastructure” and to “increase talent.”
Next came the introduction of the four management proposals and shareholder Qs on them, which were introduced by Assistant Secretary Shelley Dropkin, a former Society Chair whose voice we recognized, and who did a masterful job of pronouncing a boatload of unusual shareholder surnames. But she, as best we could tell, was never introduced herself! We counted nine, mostly very pointed questions and comments on the size of the board, the “late recognition” of shortfalls in compliance with a court consent order, eliciting a promise of a “Transformation” in the risk-control environment; “Inappropriate rewards” to a mostly unchanged board; Clawbacks, in light of “the Revlon fiasco;” a comment that “shareholders have paid the biggest fines” by far; high CEO pay vs. average employees and much-muted references, we thought, to KPMG’s audits, given what we’d say is their deplorable track record at Citi and in general. A Season-record, we think, for comments on the management proposals. (For the record, KPMG garnered only 88% of the votes in favor of ratifying their appointment vs. the normal “mode” of 98-99% - and that is WITH roughly 18% of the total votes being “gifted to them” via “broker votes” where there were “uninstructed” retail votes, which brokers are still allowed to cast on this proposal. So - in reality - only 70% of the real-shareholder votes were voted FOR the ratification of KPMG’s appointment.)
At 9:39 it was time for the six shareholder proposals to be introduced. One was a new one on us at U.S. companies - a proposal from Jim McRitchie, to add an employee director to the board, which, he said was “an opening move, which he would have gladly withdrawn had there been any response from Citi to his offer to engage in a dialog on this.” Another proposal, which oddly seems to be spreading, asks that Citi convert to a Public Benefit Corporation. What mentally and economically rational stock holder would ever consent to such a stupid idea, we’d ask. (Good news, it got just 2.5% of the votes, although at UPS, whose employee-shareholders have been very well-rewarded, it managed to garner a scary 3.4% of the votes cast.)
Then came a wide variety of mostly very-pointed questions - 25 by our count - including two from your editor - where Frazer acquitted herself very well indeed. We were extremely impressed by her clarity, cogency and familiarity with the issues - with the facts - and with the action plans being put in place. (One of our typed-in questions was why Citi had failed to engage with McRitchie as he had asked them to do, which prompted an apology and a commitment to do so. The other was how many attendees there were (320) and how many votes were cast during the meeting - (a minuscule 35,000).
By 10:40 however, we were praying for an adjournment… which took until 10:48 - nearly two hours from start to finish - to wrap-up and announce the votes: Way too long we must say to stare at one’s laptop, even when most of the Qs were good ones - but a huge improvement over Citi’s formerly interminable Q&A sessions - and a truly splendid job by the CEO.
Please see out little squib on Betting the Jockey, where, at long last, Citi has a strong one in the saddle). But Oh….Ouch! There was one final blooper in their script - a call for “All in favor?” of adjournment - a motion where there was no one there to vote, and no WAY to vote - and no NEED to vote…but where attendees were told there were “two Ayes.”
The Worst Mega-Cap VSM By Far - From Normally Admired Merck: What Were They Thinking?
We were bound and determined to attend the May 25th Merck VSM live, and as a stockholder - in part to observe Chairman Kenneth Frazier, whose statements and actions on racial issues had impressed us mightily over the past year, and in part to vote against one of their very long-term directors who, as a former CEO, was one of the biggest destroyers of shareholder value ever, who clearly does not belong on any board.
We tuned in early, and received a recorded greeting and some advice on what to do if the meeting app went down: “Wait ten minutes.” But then what?? Hmmm… In any event, we logged in successfully as a shareholder and felt ready to vote when the time came.
The sound was very low. Our own volume button was maxed out and no further help was in sight on the app. The agenda and photos of the scheduled speakers were so tiny we had to press our nose to the screen and still could not read them clearly. No way to expand or to zoom in that we could find.
To make things worse, there was an atrocious attempt at “music” - a clangorous and loud piano, insistently banging out the same set of chords over and over: Bang-bang-BANG, Bang-Bang BANG, Bang-Bang-BANG! Not a propitious beginning.
A few seconds before 9:00 came a video thanking employees and describing Merck’s Covid-19 response, followed by a pre-recorded “business review” from President Rob Davis, focusing on Ketruda, Oncology, Vaccines and Animal Health - and a few words about the spin-off of Organon. The speed seemed to be on fast-forward mode and we could barely hear or make sense out of what the speaker was saying, or how this dog’s breakfast of undigested and indigestible info came together. And Yikes! This was accompanied by the same, insistent Bang-Bang BANG! Bang-Bang BANG! - which started each section on moderately loud, then got somewhat softer as one section ended and the next section approached, making us think each time that maybe someone was fixing this, but no: Much of the info and all of the Organon discussion was drowned out completely. Clearly, no one at Merck was monitoring this pre-recorded proceeding at all - at least no one who might have and should have been able to adjust the speed and volume of the playback - and especially that maddening Bang-Bang-BANG.
Then came a recorded presentation by Dr. Roger Perlmutter, accompanied by slides that were way too small for normal humans to read, They made his calls for “next slide” a total joke - and were so boring - and so time-wasting - we decided to check out the “additional materials” tab - and lost the meeting entirely.
After a feverish attempt to find the right place to log in again, the Shareholder Login app was DEAD. But, we were able to enter as a guest, and thus became ineligible to enter a question if indeed, there WAS such an ability, since we had seen no tab for that on our first login.
The “business before the meeting” began around 9:28, and here, the audio quality was better, although somewhat scratchy. This section too was entirely pre-recorded until, we think, the comments of the two shareholder proponents - John Chevedden who presented the Steiner proposal on action by written consent - at barely audible volume - and one on “Global Access to Covid-19 Products” presented by a Capuchin Friar who came through loud and clear, after which, at 9:42, the polls closed immediately. No calls for questions or comments, and, apparently, no way for shareholders to make any - and no chance that we saw or heard to vote online. Then came a “Selection of questions” - about seven of them - all pre-selected by the management, with all of the answers pre-recorded.
We were astonished - and very much offended as a shareholder - by the slapdash way this “Meeting” had been put together, and so poorly delivered by a company like the normally admired Merck. All we can think is that with the Chairman retiring after the meeting, and the prospective Chair perhaps preoccupied with other matters - and probably not thinking of this as “His Meeting” - no one really took charge of this carelessly patched together, ill-conceived, badly delivered and inadequately monitored event. (We tried to double-check all of our reporting, only to find (no surprise) that a re-play was not on the company’s investor page.)
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