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US: Uh-oh, it's the shareholders

by Bruce MeyersonChicago Sun-Times
May 21st, 2006

It happens only once a year, and yet so many headstrong corporate CEO's can't seem to cope with being in a room with shareholders for a few hours at the annual meeting.

And so every year, companies resort to all sorts of tactics: running lengthy videos, limiting questions, and simply making it harder to get there or even get in. All these measures, none illegal, help minimize the presumed imposition of forcing top executives to listen rather than talk -- or maybe talk, but only to answer a lowly shareholder -- for just one day.

Each year, corporations endure either mild criticism or outright assaults, such as a dissident shareholder's failed attempt to oust the head of Hoffman Estates-based Career Education Corp. last week. And last month shareholders blasted North Chicago-based Abbott Laboratories' weak share price and how much it charges for its AIDS drug in Africa.

It's easy to understand a defensive posture when the annual meeting is a magnet to protesters. Among flashpoint names such as Halliburton Co. or Wal-Mart Stores Inc., which tend to draw protests at every step, this control-freakish streak seems to arise at companies of all stripes.

Companies that have shown heavy-handed tendencies this meeting season include major corporations like Target, Amgen and IBM, all of which attract a wide array of investor activism on governance, labor, environmental and social issues.

Even seemingly uncontroversial names manage to irk shareholders. Probably the most bizarre example came courtesy of Whole Foods Market Inc., a darling of the socially responsible investor movement that succeeded in offending that loyal constituency at the annual meeting two months ago in Texas.

The Austin-based natural foods grocer decided not to allow people whose proposals were being voted on to make a brief presentation. This allowance of a few minutes at the microphone is almost universally commonplace, but there's actually no legal right to it.

A representative for Green Century Capital Management, a Whole Foods investor that co-sponsored one of three shareholder resolutions at the meeting, used the question-and-answer session to comment on the proposal and express dismay at the refusal to allow presentations.

Saying he didn't want the meeting to become a ''circus,'' Whole Foods founder and Chief Executive John Mackey asserted that shareholder comments would be a ''waste of time'' and that those who didn't like it could buy someone else's stock.

Andrew Shalit of Green Century called the reply ''insulting,'' noting that companies typically limit shareholder presentations to two or three minutes. ''We're talking about Whole Foods trying to save six minutes or nine minutes,'' he said.

Whole Foods said in a statement it will research the issue. ''If we find that our policies are not in keeping with common practice, we will consider making some changes as long as they still allow us to conduct our meeting in an efficient and timely manner.''

Some strategies, such as holding the meeting in an odd location, can make it harder to attend. IBM held its meeting in Tulsa, Okla., while Verizon Communications Inc.'s was near Kansas City -- far from the New York headquarters of either company.

Others erect hurdles to gaining admission such as requesting additional identification or requiring shareholders to request a ticket in advance. Amgen, a drugmaker based in Thousand Oaks, Calif., issued what struck many investors as overly restrictive procedures, including one retracted almost immediately.

According to Peri Payne of Harrington Investments Inc., Amgen said her firm would need to submit a broker letter the day before the meeting to verify its stock holdings. Soon after a complaint to regulators, Amgen called to drop its request and apologize, Payne said. An Amgen spokesman said such a request would have been a mistake.

As it turned out, despite the intimidating marching orders beforehand, the actual meeting this past week was tame, reported John Chevedden, a well-known activist.

In other words, as often proves to be the case with micromanaging these events, Amgen's efforts created an unnecessary stir.

Target has generated bad publicity for itself almost annually since 2003, when it refused to allow a Q&A session, saying no questions had been asked the year before. In 2004, the retailer decided to collect all questions in writing rather than risking the perils of a shareholder armed with a microphone. This year, after deciding to move the event away from its hometown of Minneapolis to Georgia, Target barred reporters. It soon reversed course, but not without again looking too thin-skinned for a single day of open discourse.

At IBM's meeting, CEO Sam Palmisano took just five questions, two hand-picked from Web submissions, before adjourning the meeting with several people waiting at the microphones. The computer maker didn't respond to requests for comment.

It is possible for a company sitting at an epicenter of controversy to treat the meeting as more than a day to detest. ConocoPhillips Co., an oil company that's enjoyed huge profits as gasoline prices soar, showed as much this past week in Houston as CEO James J. Mulva invited comments after each shareholder resolution was presented, and patiently answered all questions.

It's hard to imagine a time when someone like documentarian Michael Moore might possibly show up with a video camera and get into the annual meeting, as he once did with General Motors Corp.

But it's a shame to think that companies are so uptight about facing shareholders that they approach the annual meeting like a political convention, another one-time forum for debate that's been transformed into a staged, vapid pageant. It is, after all, only once a year.


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