The share­holder spring con­tin­ues

Financial Mirror (Cyprus) - - FRONT PAGE -

It is an­nual gen­eral meet­ing sea­son – the time of year when some of the world’s big­gest com­pa­nies gather to re­port to share­hold­ers and have some sem­blance of a con­ver­sa­tion with them. For the next cou­ple of months, a suc­ces­sion of com­pa­nies will talk about what in­flu­enced their per­for­mance over the pre­vi­ous year, what they are plan­ning for the fu­ture, and the de­ci­sions that their boards have made.

There was a time when th­ese meet­ings took place with­out much fan­fare, mostly un­no­ticed by the public. That has not been true for a cou­ple of years. A wors­en­ing econ­omy and widen­ing in­equal­ity have spurred more peo­ple to be­come more en­gaged and take an in­ter­est in the ac­tiv­i­ties of com­pa­nies and those who run them. And, with that change, at­ten­tion has broad­ened from CEOs and ex­ec­u­tive teams to those who pre­vi­ously ex­isted in a black box: the com­pa­nies’ board mem­bers.

In 2012, share­hold­ers and oth­ers started shin­ing a bright light on boards, ques­tion­ing their de­ci­sions and ac­tiv­i­ties, and those of in­di­vid­ual mem­bers, and thus was born the Share­holder Spring. Peo­ple grew tired of tone-deaf board di­rec­tors op­er­at­ing in sound­proof rooms, seem­ingly ig­nor­ing eco­nomic re­al­i­ties and the public’s mood. They wanted to con­front those who de­cide on ex­ec­u­tives’ of­ten eye-pop­ping com­pen­sa­tion or ap­prove com­pa­nies’ de­ci­sions to un­der­take so­phis­ti­cated tax en­gi­neer­ing. Peo­ple wanted to know whether board mem­bers were ac­tu­ally do­ing their jobs or just fill­ing seats and col­lect­ing a nice fee.

Many com­pa­nies and com­pany boards hoped that this height­ened in­ter­est would pass quickly; in­stead, it has ma­tured. Dis­con­tent has con­tin­ued to mount, and in­vestors, em­ploy­ees, politi­cians, and mem­bers of the public now want to know not only about ex­ec­u­tive com­pen­sa­tion, but also about the fre­quently stag­ger­ing dis­crep­ancy be­tween what com­pa­nies’ high­est- and low­est-paid per­son­nel earn. They want to know about living wages and zero-hours con­tracts. They want to know what com­pa­nies are do­ing to ad­dress cli­mate change, whether they are re­spon­si­ble com­mu­nity mem­bers, how they be­have in con­flict zones, and much more.

Those ask­ing the ques­tions are no longer con­tent to protest out­side. They are be­com­ing in­creas­ingly so­phis­ti­cated about how to be heard, buy­ing shares, step­ping up to the mi­cro­phone, and look­ing board mem­bers in the eye, so that their ques­tions be­come part of the of­fi­cial min­utes. And they are putting pres­sure on com­pa­nies’ ma­jor in­vestors to hold board mem­bers to ac­count as well.

The ques­tions posed and state­ments made can some­times be long­winded. But many of them are le­git­i­mate, and they are an im­por­tant re­minder to boards that they must serve the com­pany’s en­tire ecosys­tem – in­vestors, em­ploy­ees, cus­tomers, and com­mu­nity alike. In­deed, th­ese open meet­ings are a re­minder that board mem­bers must ask the hard ques­tions all year round, rather than sim­ply rub­ber­stamp­ing man­age­ment pro­pos­als or go­ing along to get along.

In­ter­est­ingly, just as the move­ment to hold boards to ac­count has gained greater trac­tion, some com­pa­nies have adopted new ways of con­ven­ing an­nual share­holder meet­ings. Th­ese were once fairly staid gath­er­ings. The com­pa­nies’ se­nior man­age­ment would walk in­vestors and board mem­bers through the re­port­ing for­mal­i­ties step by step, present re­sults, take ques­tions, vote, and move on. There was tea, cof­fee, and bis­cuits, but noth­ing fancy.

In re­cent years, how­ever, there has been a trend to­ward a more car­ni­val-like at­mos­phere, with com­pa­nies bring­ing in big-name en­ter­tain­ers and turn­ing the event into a feel-good pep rally. Last year, Wal-Mart’s an­nual meet­ing fea­tured Harry Con­nick, Jr., Robin Thicke, and Phar­rell Wil­liams. In 2013, El­ton John per­formed.

In con­trast, other com­pa­nies have swung to the op­po­site ex­treme and em­braced fully vir­tual meet­ings. The board gath­ers in front of a cam­era for a live we­b­cast to share­hold­ers, takes ques­tions sub­mit­ted in ad­vance, and avoids the pro­test­ers al­to­gether. This year, HP joined Sprint and Martha Ste­wart Living Om­n­i­me­dia down this road.

There is a virtue to hav­ing a meet­ing with a vir­tual com­po­nent: busi­nesses are global, and so are their in­vestors, who can par­tic­i­pate with­out hav­ing to get on a plane. But a we­b­cast of a meet­ing with a live au­di­ence would be the ideal com­bi­na­tion. And while com­pa­nies might ar­gue that en­tirely vir­tual meet­ings save money – which of course is true – in­vestors do not need Robin Thicke. They will set­tle for good num­bers, se­ri­ous dis­cus­sion, and a dry bis­cuit.

Boards and man­agers must take th­ese meet­ings se­ri­ously. Part of the job is fac­ing those with some­thing at stake. Host­ing cir­cuses or hid­ing be­hind cam­eras will not keep tough ques­tions from com­ing. A seat at the board­room ta­ble comes with the re­spon­si­bil­ity to stand up and do this vi­tal part of the job – in per­son and with­out mu­si­cal ac­com­pa­ni­ment.

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