The Top-Two 2024 VMs – A Two-Way Tie Between Citi And Verizon
AT CITIGROUP – A WELL-RUN, HIGHLY ENGAGING AND INFORMATIVE EXPERIENCE…We were especially anxious to tune in the Citigroup VSM this year because we are huge fans of CEO Jane Fraser and continue to bet that at long last, this able “jockey” will be able to rein in the wild and crazy value-destroying horse that Citi has been for so long.
Fraser did not disappoint. After brief, seemingly pre-recorded introductory remarks, she turned the meeting over to the Corporate Secretary to handle the ‘business portion’ – four management proposals and six shareholder proposals, one of which was withdrawn before the meeting. While we are usually not fans of debating proponents at the meeting, we were happy to hear Jane step in at several points to correct or clarify the record and to keep things moving.
The best part by far was the very robust Q&A period, which lasted from 9:50 until 10:28 where, once again, the questions were very ably teed-up by Assistant Secretary Shelley Dropkin - who this year we were happy to hear, was properly introduced – and where Jane answered a host of questions on things like fossil fuels, deepwater drilling, emission targets, a potential meeting with an indigenous chief, the Banamex IPO – smoothly fielded a handful of anti-ESG comments on DEI, Environmental and Social Risks – and a question from your editor on what was being done to deal with – and to bolster employee morale during the ‘rightsizing’ exercises’ where she gave what we felt was a wonderful answer and one we could really relate to as a former bank employee: While trying to manage mainly by attrition, she said, there is strong employee support for the ‘laser focus’ that produces more time for customers and, by reducing management layers, makes for an “easier place to work.”
One shareholder called for a return to in-person meetings and, while we still love them in principle, the well-run Citi VSM is a HUGE improvement over their old-time, hugely attended free-for-alls, jam packed with mostly silly comments and questions that lasted most of a day.
THE VERIZON MEETING: RUNNING LIKE CLOCK-WORK, AS ALWAYS, WITH YET ANOTHER IMPRESSIVE CEO AT THE HELM:
Full disclosure, your editor-in-chief was one of two Inspectors of Election at the Verizon meeting, which we monitored online from start to finish. This was one of two meetings of the 500+ meetings that we and our team monitored through June where Computershare was the VSM meeting manager, both of which ran smoothly and efficiently. Verizon’s started at 10:00 a.m. eastern time – on the dot - with Verizon’s chairman Hans Vestberg introducing the Directors and corporate officers in attendance before turning the meeting over to the Corporate Secretary and Chief Governance Officer, Bill Horton, to conduct the official business.
Horton introduced the three management proposals, asking for questions after each one, then, as they traditionally do, announcing the preliminary voting results. Next, he called on each of the seven shareholder proponents in turn – the first of whom initially missed his cue, but woke up just in time, and the last of whom appeared to have dialed in, and hung up, so Horton introduced that proposal himself. There were no questions on the proposals and the polls closed precisely at 10:30 a.m., after which Vestberg made some brief remarks before opening the floor to general questions.
Both Jane Ludlow, the other IOE, and your Editor-in-Chief, were really impressed with Vestberg’s keen intelligence – and with the way he listened to and fielded the many good questions he got. Asked what he will do as spending on 5G will likely decline he noted that priority one is to invest in the business, second is to “keep the board in a position to increase the dividend” as they’ve done over their 17 years as a company, then to pay down debt and to “consider” share buybacks. In response to a suggestion that he stop his support for LGBTQ rights he noted that Verizon is a “Best Place to Work” - and that he is proud of Verizon’s record and “Proud to lead here.” Great comments on A.I. too, which they have been using “for a long time to enable employees to serve customers” – and the need to have “strong governance” here - as well as strong, forward-looking and ambitious comments on best prospects for future growth. The Q&A period ended at 10:44 and, after a thank you for attending, the meeting ended at 10:45 on the dot. An outstanding and highly respectful use of investor time and attention, we say.
JPMORGAN CHASE - “MIDDLIN’” SAD TO SAY - AND A MISSED OPPORUNITY TO SHOWCASE AN AMAZING 24-YEAR RECORD AND A TRULY OUTSTANDING CEO:
As a JPM Chase alumnus (via the purchase of both JPM and Chase in Y2K - which came fast on the heels of the Manny Hanny merger of equals with Chemical Bank - who quickly and seamlessly gobbled up two of their biggest former rivals) - your editor in chief was really looking forward to their VSM. JPMC has been a lifetime, high-performing “core holding” – and, as an investor who strongly tends to ‘bet the jockey’ - he is a major fan of Jamie Dimon too - one of the very best CEOs out there, for sure.
Your editor’s interest was even further piqued by the dismissive comments Jamie had been making about the non-importance of shareholder meetings – and piqued yet again when Doug Chia challenged Jamie to make something meaningful of it in his widely followed blog.
Further fueling your editor’s interest in the meeting, the 2023 Annual Report was a masterwork – with a great theme – “Powering Growth with Curiosity and Heart” – backed up by loads of truly impressive facts and figures – like #1 Bank in retail deposits and #1 for small businesses; #1Corporate and Investment Bank; #1 Private Bank and Asset Manager, Top 5 of Most Admired Companies and #1 in Customer Satisfaction… plus ”Record Revenues”… a “Fortress Balance Sheet”…and a very strong, wide-ranging and detailed Chairman’s letter from Jamie, very much in the Warren Buffett mode.
Sad to say, the meeting itself was a missed opportunity to really connect with shareholders and for Jamie to make a much-deserved splash on his 20th year with the bank, following its acquisition of Bank One - and Jamie himself - who had been foolishly fired from Citi a few years earlier by the rightly jealous Sandy Weill.
The meeting started off on a very good note indeed - with background music by your editor’s favorite composer, J.S. Bach, in lieu of the usual elevator music - or even worse, the electronic, bangy, bongo-boogie-woogie on endless repeat that plagues so many VSMs these days. But ouch! - it was played ‘sewing-machine style’ on a tinny-sounding piano. Seriously! Out of thousands and thousands of recordings of Bach keyboard works to choose from, who came up with THIS one?
Then came a seemingly interminable period of dead silence (about one full minute) before the meeting was opened by Dimon, who focused on “six major issues” and delivered a few fresh and very good points for investors to ponder, albeit in a rather “flat” and mostly unengaging manner: A.I., The Cloud, Regulators (who “rely on us to step forward”) the “must” need to “earn the trust of communities where we operate” (hence, a continued focus on DEI) - the “Essential role of market-making” and “Navigating a potentially dangerous world” where we “must be engaged globally.”
Then, the GC moved all the management proposals at once and six of the seven shareholder proposals were introduced via a mix of live and pre-recorded statements – and where a seventh proposal for a “Report on workforce civil liberties” was withdrawn by the satisfied proponent before the meeting began.
Next came a 30-minute period for questions on the proposals themselves, where there were a few tough ones that were handled in an “OK manner” but which were punctuated by a number of awkward silences. These got even worse during the 30-minute period for “open Q&A” which were also handled in a “sort of OK manner” but where the “screeners” had major issues - and long silences - occasionally broken by comments that they were “compiling questions.” Not a professional presentation at all, and not a very rewarding experience for listeners who were relieved, we think - as we were - when the meeting ended after an hour and 46 minutes.
A major missed opportunity for shareholders – and for Dimon himself to really “show his stuff.” We hope to have at least one more meeting where Jamie presides, but PLEASE, we urge, make time for a full-dress rehearsal, use the existing technology to quickly and efficiently tee-up questions (see the article below) - and Jamie - regardless of what you think of shareholder meetings, work a bit harder on your delivery – out of respect for the shareholders who tune in - and to project your very best self.
MOST IN NEED OF IMPROVEMENT - AMAZON.COM – another VSM we were really looking forward to – mainly to see how they’d handle the record-breaking seventeen proposals on the ballot. (Spoiler alert – Not well.)
We were latecomers as Amazon investors but basically very happy ones, having “bought on a big dip” not so long ago…and honestly, “Who can live without them?” But what a dog’s breakfast of proposals there were: Three calling for new Board Committees, five for additional data in existing reports and six asking for new reports.
We tuned in early so as to not miss a thing and were treated to some of the worst background music ever – electronic boogie-woogie with a loud and incessantly repeated bongo beat. Aaargh!
The bongos stopped precisely at noon, eastern time – after which the CEO, GC, Director of Financial Communications – and all the directors present were introduced, followed by the introduction of the management proposals. Then, the shareholder proponents were allowed two minutes to introduce their proposals, which seemed a bit chintzy to us, but all were pre-recorded and managed to come in under the wire.
We followed each presentation carefully, marking our votes on our VSM – and actually considering changes in three of our original voting decisions – but OMG! Without any warning at all, the polls were officially closed as soon as the last presenter was done - before even the fastest-fingered voter ever born could stand a chance to vote!
To top things off, there was yet another breach of good practices here: We could not find proposals 16 and 17 on our VIF to note our choices. Ultimately, we found them, side by side in the middle of an otherwise mostly blank ‘verso’ - where few voters would think to look - especially because the signature line was, as usual, on the bottom of page one.
A ‘procedural purist’ – or any shareholder with a bone to pick - might say that all the votes on props 16 and 17 were invalid because the signature line ended at prop 15. We did a little sleuthing to conclude that (1) none of the outcomes were affected based on votes cast - or not cast by participants during the meeting, as in our own case, and (2) to conclude that voters on props 16 and 17 should absolutely not be disenfranchised because of the less-than-perfect layout of the proxy card.
But readers; had there been a proxy fight here, the rules are much more stringent - and the likelihood of a formal challenge would be much greater – and the outcomes in such challenges based on “technicalities” are much harder to predict.
An excellent example of how important it is to allow ample time for voters to vote online at the Meeting, and to give fair notice and fair warning as to exactly when the polls will open, and close – and yes, to proofread ALL proxy materials with special care.
TWO MORE TAKEAWAYS FROM 2024 VSMs – ONE REALLY GOOD AND ONE HORRIBLE
First, a nifty new feature at Broadridge’s VSP app: When you go to enter a question, a dropdown tool asks you to indicate whether it is about Directors, Auditors, Compensation – or one of the shareholder proposals – or “other.” What a huge help this is for the folks who have to try to tee the questions up quickly, and in a useful way – and to deal with duplicate, overlapping or simply irrelevant or inappropriate questions and comments. And it helps to focus the questioner’s mind too!
Then – horrible - HIGH INTEREST IN GAMESTOP’S VSM CRASHES THE VSM APP:
Low marks on meeting planning, for sure – both on Gamestop’s and Virtual Meeting host Computershare’s part – both of whom should have been aware of the fact that Gamestop has one of the largest and most engaged group of retail owners anywhere – AND that the big return of the dedicated ‘short-squeezer’ Keith Gill, aka “Roaring Kitty” – the hugely followed Gamestop fan who now appears to be Gamestop’s fourth largest investor – has been stirring up even more interest in the company.
Computershare’s meeting app crashed on Thursday June 13th because of “too many viewers” and was rescheduled for Monday the 17th, where it went on without incident. The Gamestop Transfer Agency has been a huge success for Computershare, where, in an unprecedented development, shareholders have moved en masse from street-name to registered positions following voting snafus by the newish and smallish custodial institutions that many of their brokers used – which were not properly connected to proxy-plumbing systems, such as they are. We know, of course, that CPU – and Gamestop – will not be likely to make THIS mistake again…
MORE SLOPPINESS? OR A GRUBBY FEE-GRAB AT A MAJOR T-A?
Just before we went to press, we got a call from a long-term friend, the retired former Corporate Secretary of a major U.S. public company, asking about a “transfer agent issue.”
Both she, and her son, had gotten a letter from a subsidiary of the transfer agent her former company is using, saying that their accounts were subject to escheatment, for “lack of contact.” When she called to inform them that both she and her son have been voting their proxies faithfully, she was informed that this did NOT constitute “contact.”
She was also very concerned that the subsidiary company was trying to sell services, like effecting transfers and obtaining replacement certificates at what seemed to her to be very high costs. that (a) she did not need and (b) that she believed the company, through its transfer agent, were normally providing for free.
She sent copies of all the correspondence, where we noted that their document says one must have contact with the Transfer Agent to establish “contact.” So, as we suspected, since her former company uses another provider to mail and process proxies, voting does not qualify - UNLESS, as we have been advising, the issuers insist that the info on voted proxies is forwarded to and posted on the TA’s records - which no one seems to be doing. One can’t expect that either Broadridge – or any of the other providers of proxy voting services, like Mediant and Say would do this for FREE - but it is a very simple job to accomplish - AND this would prevent the need to send letters like this one, so at worst, “a wash” in terms of expense and a major “plus” in terms of investor protection.
Both of us felt, however, that the subsidiary company is trying to take advantage of shareholders by offering a “service” that can be accomplished by the Transfer Agency parent for NOTHING - except for the Bond of Indemnity. Premium. They do in fact disclose this - but way down in the fine print, But their ‘processing fee” – 10% of the value of shares transferred, with no cap – is an outrageously high rate for holders of material amounts of stock. The form itself is ‘sneakily designed” we both thought, to ‘lead one down the garden path’ - without focusing on the 10% fee, with no cap as there should be for an essentially routine transaction - which the average holder won’t discover until after the deal is done.
Both of us felt that unless the subsidiary caps the 10% “processing fee” at a reasonable level, they should be ordered to cease and desist from soliciting shareholders as they are doing now. Most important to note, however, the parent transfer agent – and all other TAs - should get on the ball and note proxy voting as a “contact” that would indeed prevent shares from being deemed abandoned and letters like this one from being sent.
This is no small matter: Currently, the vast majority of proxy mailing and tabulation services – once provided almost exclusively by the companies’ transfer agent - are being provided by Broadridge, Mediant and a few other firms. All of the players need to step up to the plate to provide investors with the protection from automatic escheatment they deserve to have.
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