An increasing number of corporations are moving their shareholder meetings away from headquarters. Over the past five years, 8 of the 50 largest public companies in Minnesota, including Northwest Airlines, U.S. Bancorp, and Imation, held their annual meetings out of state. In May, Boston-based Gillette Co., whose merger with Procter & Gamble was just approved, held its annual shareholder meeting in Rye, N.Y., home to CEO James Kilts and, claim critics, far away from shareholders and their tough questions.
Gillette says it has held its meetings in Rye since 2003 to be closer to its shareholders in New York. But Marjorie Francis, a Gillette and Procter & Gamble shareholder, thinks otherwise. She believes companies that move their meetings are shirking their responsibility to shareholders by making it difficult to get to the meetings. "It's a terrible way to treat us," she says.
California-based Sempra Energy also raised eyebrows this year when it held its shareholder meeting in London, nearly 6,000 miles from its San Diego headquarters. The company said it wanted to raise its profile in Europe and expose its directors to its European operations. But as in the Gillette case, critics believe Sempra moved the meeting to avoid inquisitive shareholders.
Of course, some companies have always held annual meetings far from headquarters. Atlanta-based Coca-Cola Co. has held its meetings in Wilmington, Del., since the 1930s, and Burbank, Calif.-based Walt Disney Co. holds its meetings in a different city each year.
"The issue is not how far from headquarters a company holds the meeting, but whether it is purposely moving the meeting to a place inaccessible to shareholders," says Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. "Corporations should want to have their meetings where the [greatest] number of investors can attend."
Some shareholders are unhappy with the remote meetings. After expressing her concerns to the Gillette board at the meeting in Rye, Francis was told she should attend the next P&G meeting — in Cincinnati.
"Go way out there?" she said. "No way, Jose." — L.D.
Boardroom Baddies
Do you have a problem child on your board of directors? If you do, expect to take some heat from The Corporate Library. The independent research firm that provides corporate-governance data is singling out underperforming board members and designating them "problem directors." Its goal is to pressure fellow directors, executives, and shareholders into holding the board more accountable for company performance and getting rid of ineffective directors.
"Failed CEOs and directors of failed companies still serve on boards today," says Nell Minow, editor and co-founder of The Corporate Library. "So it's been our job to identify, and in fact embarrass, directors if they do a bad job." That includes directors involved in corporate bankruptcies, major litigation, regulatory infractions, major accounting restatements, and other corporate scandals.
The Corporate Library flagged Ronald Ferguson, a former consultant for General Re and an outside director for Colgate-Palmolive Co. Ferguson is listed as a problem director because he refused to answer questions from regulators about a transaction between General Re and insurer American International Group that allowed AIG to inflate reserves.
To some people, the designation is the financial equivalent of a scarlet letter. Gavin Anderson, CEO of corporate-governance ratings agency GovernanceMetrics International, is quick to point out that Ferguson's behavior is not an accurate reflection of either Colgate's or its board members' integrity. "Colgate is known for excellent governance. It has a high degree of transparency and disclosure," he says. (Colgate declined to comment on Ferguson.)
A harder look should instead be given to directors with long tenures at companies that struggle for years, says Anderson. "That suggests to me that the board hasn't taken actions to rectify problems," he says.
According to Beverly Behan, a partner in the corporate-governance practice of Mercer Delta Consulting LLC, addressing and removing underperforming directors is not as simple as it seems. "Historically, boards would rather turn a blind eye to underperformers. Most members are distinguished colleagues or well respected in their fields, so approaching them and telling them to shape up or leave can be awkward," she explains.
But board members that do nothing, says Minow, are equally to blame. "If they don't have the courage to stand up to someone who has a bad reputation and say, 'You need to step it up,'" she counters, "then they shouldn't be on the board either."
— James Montalto
Going Public, Eh?
Faced with a challenging regulatory environment and a lukewarm market for IPOs in the United States, some U.S. companies are heading north to Toronto, using an increasingly popular vehicle known as an income security to make their public debut.
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