Four Annual Meeting " Musts" For Your Board
BY Ralph Ward
It's annual meeting season and, once again, most companies will make poor use of their boards of directors. At a time when shareholders are feeling edgy, may have tough questions, and need to be assured that the "lights are on in the boardroom," smart corporations will grab this opportunity to make their board part of a smart Investor Relations strategy. Here are some tips on how to go about doing just that:
Carl Hagburg, a respected IR consultant, has attended 300 annual meetings over the years, and finds that a "best practice is to have the directors up there on the dais, facing the audience." This way the company "sends a strong message that the directors are there in force, and that you're proud of them -- they're literally facing the audience." ITT Corporation, for example, used to do this. You're not necessarily leaving the directors open for questions (though they might be), but it is a great sign of governance "full disclosure." At the very least, put your board members in the front row, introduce them, and have them stand and give the group a wave.
Although expecting board members to answer shareholder questions is not yet the norm, it's worth noting that the norm is shifting in that direction. "Committee chairs, at least, should now expect to speak," says Hagburg. This remains a bit cutting-edge, but, "especially with the new audit committee rules, the committee chair needs to be prepared for questions." Executive pay and options are also hot issues now, so your compensation committee chair may also come in for some grilling.
The annual meeting proper isn't the only board IR opportunity. "Directors can be made available at the meet and greet session with shareholders," notes Hagburg. Especially if a contentious proxy issue is expected, your directors can "spend a half hour before the meeting mingling and shaking hands to defuse tensions."
Be prepared for a potential director downside at your annual meeting. In recent years, activists attacking companies on hot social or environmental issues have carried their battles to other corporations on whose boards the target firm's directors or top execs may serve. "For years, unions who were trying to organize the Albertson's firm were pursuing its directors at their own companies' annual meetings," says Hagburg. So put some research into any such spillovers that your directors may bring from other firms, or that your top execs may face from outside boards on which they serve. Who knows -- you may have an activist lightning rod hidden away in the front row.