Thursday, December 22, 2011

Shareholder Meetings

Matthew Rafat's blog has a first-hand record of shareholder meetings for a number of companies, though mostly in the Bay Area since that is where he is based. With organizations such as moxyvote starting up and various motions towards more responsive corporate governance, this record is an interesting data point. Large shareholders (pension funds, etc.) are still for the most part slumbering giants. From Rafat's account, it appears that most small shareholders couldn't care less, with most meetings seeing < 10 outsiders in attendance (sometimes only 1 or 2). Curiously, the two companies Rafat found most likable and friendly towards shareholders (Brocade and Tessara) underperformed the market (down 4% and 24% versus S&P down 0.2% and Russell 2000 down 5.4%). There isn't enough data to draw any conclusions from that. I know that from the executives' point of view, shareholder meetings can be annoying or even an embarrassment when small shareholders (including the ranks of organizations such as Greenpeace, PETA, and religious organizations) bring up shareholder resolutions, but what can't shareholder meetings be, in principle, constructive and mutually beneficial. For most shareholders especially the large ones, the long-term growth and well-being of the company is in their interest. This is a big part of today's executive compensation quandary. When shareholders neglect their responsible for the oversight of corporate governance, then all responsibility falls on the executives, the board, and maybe a few well-heeled activist shareholders. The incentive system is rigged to fail. I cannot underscore enough that how well these companies are run and how well they control their costs affect the retirements and livelihoods of millions of Americans and beyond.

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