Shareholders less hesitant to speak up

Corporate scandals put an edge on questions

Conviviality amid resolutions

Reminding managers who owns the place

May 16, 2004|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN STAFF

Paul Lubell had a question about the Rouse Co.'s stock dividends. Helen Ruther had a point to make about its street crossings. And Joan Howe asked, as she does every year, why men outnumber women on the company's board of directors by 9-to-1.

This month, they all had the ears of Rouse's senior executives.

The opportunity came courtesy of the annual meeting, that one time of year in corporate America when small shareholders can easily buttonhole the big guys who run their company and offer up a piece of their mind.

The annual meeting -- required of public companies by law -- is a quirky affair in America, a mix of PR show-and-tell, high theater and the occasional picket line. For years it had little to do with business. With some exceptions -- like Rouse -- the meetings were largely run for people who didn't show up, by people who didn't particularly want them to.

Enron's blowup changed that.

Now, investor groups say, more people are showing up, and more are pushing for action beyond rubber-stamped board elections. Shareholders have filed about 1,100 proposed resolutions so far this year for companies across the country, 50 percent more than in 2001, according to the Investor Responsibility Research Center in Washington. Most focus on corporate governance, such as capping executive pay.

"I'm too close to it to tell if it's an evolution or revolution. There's been a change," said Carol Bowie, director of governance research at the investor responsibility center. "There's a recognition on the part of shareholders that, number one, they're owners -- and they need to act like owners."

Added Hank Boerner, managing director of the New York office of Rowan & Blewitt, which advises companies on investor relations and other issues: "The shareowner now realizes these are not gods, these board members and CEOs, and they should be held accountable."

Culture shift

A show of shareholder muscle at the Walt Disney Co.'s annual meeting in March separated chief executive Michael D. Eisner from the chairman position. Safeway Inc., trying to appease investors intent on ousting its chief executive and two others from the board at its meeting this Thursday, decided May 3 to replace three other directors with close ties to the company.

"The voting process is just being taken with much greater seriousness," said Bill Patterson, director of the office of investment for the AFL-CIO. "I think that the culture is shifting around annual meetings."

A decade ago, so few shareholders went that there were constant calls by corporations to forgo the get-togethers altogether, said Sarah Teslik, executive director of the Council of Institutional Investors.

"No one says they are non-events anymore," she added wryly. "It amazes me how afraid a lot of companies are of what will happen at the shareholder meeting. It's a very significant motivator."

Some executives try to avoid confrontation by getting annual meetings over with as quickly as possible or holding them in inconvenient places -- outside the country, for instance. But Boerner, the corporate adviser, thinks that's the wrong philosophy. It can be a prime marketing moment for companies, he said, a chance to build goodwill among the people betting the business will succeed.

A few corporations want -- and get -- vast audiences to hear their message.

About 15,000 people go to Arkansas every June for Wal-Mart Stores Inc., which books a college arena to hold everyone, including two employees from each store worldwide. Warren Buffett's company, Berkshire Hathaway Inc., draws about the same number to Nebraska for what has been dubbed the investors' Woodstock -- a weekend-long bash with a cocktail party, barbecue and group shopping day.

Being accessible

Meanwhile, 65 percent more annual meetings were Webcast last year than in 2001 for shareholders who can't afford to travel out of town, according to

Some are set up so people can e-mail questions to the executives on the dais in real time, the online equivalent of standing in line at the microphone. More than 300 signed on to watch the McDonald's Corp. Webcast last year.

"It's the intangible element of showing that the company is trying to be accessible to its shareholders, that it's trying to be open and transparent," said Bradley Smith, director of marketing communications for, which handles Webcasts and similar activities for businesses. "It all has to do with building back investor confidence."

Investors are clearly more confident about speaking up these days.

The recent crop of shareholder proposals, voted on in time for the annual meeting, are efforts to pressure companies to -- among other issues -- treat stock options as expenses and get investor approval before handing executives golden parachutes.

This is already a record-setting year for the sheer number of shareholder proposals on corporate governance, and they're still coming in.

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