Springtime ushers in a rush of annual shareholder meetings, but these days, few investors are making this corporate pilgrimage. Every publicly traded stock is required by law to hold an annual shareholder meeting, and most companies fulfill this requirement with as little time or meaningful content as possible. But failing to participate can be costly when investors and executive managers fail to look each other in the eye.
Of the thousands of public shareholder meetings, most begin with the CEO reading a scripted (boring) financial update that highlights the wonderful opportunities that lay ahead. The board of directors is elected (usually reelected), and a short period is left for Q&A. Yawn.
My first experience with these shareholder meetings was a major turnoff. In March 2009, I purchased a limited number of shares of Genworth (GNW) stock for reasons I do not proudly share among value investors. GNW was trading for $1.00 per share, and I wanted to own shares in a local company. I don’t recommend this strategy, but my arbitrary bet paid off as soon as Hank Paulson and Ben Bernanke began their federally funded campaign to save the financial industry.
The following year, I decided to attend the annual shareholder meeting, held at a local hotel next door to the corporate headquarters in the suburbs of Richmond, Virginia. I was very interested to see how the management executives would address the public a year after this titan of the Fortune 500 lost billions of dollars of shareholder money and then was bailed out just before falling into bankruptcy.
I was stunned by what I found. The large room was full of dark suits, all Genworth employees and directors. I was one of five or six shareholders in attendance, and the Genworth executives offered a fairly cold reception. I later learned that few real investors show up at these shareholder meetings. Of the few that attend, most of the outspoken ones are crackpots looking for any podium to heckle corporate bigwigs. Most shareholders without an ax to grind ignore the small print offer to attend this get-together.
A few questions were offered during the Q&A period. I even summoned up the courage to inquire about the risk of falling international real estate values. The CEO wrapped up the Q&A as quickly as he could without coming across as entirely rude, and we were all thanked for our support and attendance.
Despite my experience, I’ve since learned there are only a handful of truly remarkable annual shareholder meetings. At the top of the list is the Berkshire Hathaway shareholder meeting, dubbed a “Woodstock for Capitalists.” Every year in Omaha, shareholders are granted hours of direct access to Warren Buffet and his colleague Charlie Munger. For football fans, the Green Bay Packers offer an enticing annual shareholder meeting held at history-rich Lambeau Field while watching prior-season highlights on the Jumbotron. But the great majority of shareholders meetings fail to create any excitement at all.
Many blame a change in stock ownership for the loss of interest in shareholder meetings. In 1950, 90% of stocks were owned by individuals. By 2011, only 30% were owned by individuals, and the remainder were owned by pension funds, mutual funds, life insurance companies, and endowments. These institutional owners show no interest in participating in these corporate PR events, and they often fail to take the time to vote on behalf of the shares they manage.
Despite the waning interest in annual shareholder meetings, I still plan to attend at least one shareholder meeting a year. I think of these meetings as I do political elections. Even when I am sure my single vote will have no effect on the outcome of a presidential or congressional election, voting reminds me of the freedom I enjoy that I should never take for granted. It’s a patriotic duty.
Shareholder meetings offer the opportunity to look beyond the glossy annual reports. Sure, I can always vote my shares by mail or electronically through the proxy voting process. And my strongest voice is in my ability to vote with my dollars. But these meetings are a reminder that an investment is more than a piece of paper or a digital entry in an online brokerage account. While attending a shareholder meeting, you get to look the CEO and top management team in the eye and are reminded they are human beings. More importantly, these meetings offer a visual reminder to corporate management of the people they serve.
Many of the abuses in corporate America occur when those in top management forget they are merely stewards for the real owners of our most prestigious companies. And when so few show up to shareholder meetings, how can we blame them?
Consider joining me in attending at least one shareholder meeting a year. I can’t promise much excitement, but you will leave with a stronger sense of connection and responsibility over your investments. A growing number of firms are also offering a live webcast so you can virtually attend the meeting.
If you are interested in this corporate ritual, you must buy at least one share of a company stock that holds its annual meeting in your region. The local business pages typically list these regional company stock prices. However, check with the Investor Relations Department before your purchase to make sure the shareholder meeting is held nearby.