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Shareholders'
Meetings Should Keep It Real
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LET
THE INVESTORS BE HEARD. PHOTOGRAPHER: CHRISTOF STACHE/AFP/GETTY
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April 12, 2017 6:00 AM EDT
U.S. public companies are moving away
from the traditional shareholders' meeting, opting instead to interact
with investors online. Sensible as this might seem in the internet
age, it's important to ensure that it becomes a way to improve --
rather than stifle -- communication.
The annual general meeting is among the
most hallowed institutions of American capitalism: an opportunity,
once a year, for owners to ask their company's executives and
directors any question. Online participation can
expand access and reduce
travel costs, which helps explain why more than 150 companies --
including HP Inc., Comcast Corp. and PayPal Holdings Inc. -- have gone
completely
virtual over the past few
decades.
The problem is, virtual meetings can
also
enable companies to shut down
valuable dialogue. Online, it's easier to cut off awkward lines of
inquiry (something that commonly happens, for example, on the
quarterly conference calls where companies report their earnings). As
recently as last year, virtual-meeting service Broadridge Financial
Solutions Inc. actually
touted the ability to
"privately view and manage" shareholder questions. Many companies
offer
audio participation only,
meaning investors can't see executives' reactions, or in some
cases even know who's present.
Granted, physical meetings can waste a
lot of time, or worse. Gadflies and protesters can monopolize the
events, inundating executives with invective that has little to do
with performance. That said, at crucial moments the meetings can
matter. In one
notorious instance, back in
2006, Robert Nardelli's contemptuous refusal to answer questions at a
Home Depot Inc. annual meeting played a
pivotal role in his ultimate
ouster as CEO. And over the past several years, Exxon Mobil Corp.
investors have pushed the company to recognize and adapt to climate
change, with some
success.
In other words, the physical
shareholders' meeting offers a valuable complement to the virtual. It
guarantees that the people most motivated to monitor companies'
performance can, if necessary, hold executives to account in person.
Even if the opportunity is rarely used, the benefits accrue to
everyone by discouraging the kind of bad management that can undermine
growth and that has all too frequently tarnished the reputation of
U.S. capital markets.
How, then, to maintain the in-person
tradition? In principle, executives and directors ought to recognize
that it's good for their companies and therefore a matter of their own
enlightened self-interest. If that doesn't work, the New York Stock
Exchange and NASDAQ -- gatekeepers to the ranks of the most
prestigious public companies -- ought to make in-person annual
meetings, with or without online participation, a requirement for
listing.
To contact the senior editor responsible
for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net.
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