Business: Shareholder meetings hit the road; Critics say it is one way companies can hide from angry investors

By Pallavi Gogoi and Rachel Beck

AP Business Writers

NEW YORK (AP) -- When it's time for the annual meeting and things might get ugly, there's no place like the road.

Marshall & Illsley Corp., a 164-year-old Wisconsin bank, usually meets with shareholders each April in its hometown of Milwaukee. But that was before the bagpipe-playing firefighters and marching teachers descended on its branches by the thousands earlier this year to protest contributions from executives to Gov. Scott Walker. And it was before the board decided to sell the bank to a Canadian company, a deal that includes $65 million in severance for those same executives.

M&I postponed its regular annual meeting and decamped for New York, 900 miles away, for a hasty special meeting last week. It would be the bank's last shareholders' meeting -- and it only lasted seven minutes. Attendees say executives promised to take questions at the end but never did, and exited quickly through a back door after holding a vote to approve the acquisition by BMO Finance Group, the parent of the Bank of Montreal.

"How can shareholders cast an informed vote if the executives acting on their behalf fail to answer basic questions?" says Daniel Pedrotty, director of the office of investment for the AFL-CIO, which has some members with retirement money invested in M&I through pension funds.

Executives of publicly traded companies are required to face their investors once a year at annual meetings, typically in the spring. These meetings allow shareholders -- ranging from investing clubs made up of grandmas to large pension funds -- to see and question the CEO and other top executives. For small shareholders, it's likely the only chance to get face time with a company's leaders.

While moving a meeting isn't a new phenomenon, these annual events are most often held in the city where a company is headquartered, or in Delaware, where many of them are incorporated. Sometimes a company might hold its annual shareholder confab in a location where it has a strong business presence, a significant number of employees or a new partner.

But critics say going on the road is also one way companies under fire can hide from angry investors and avoid confrontations with shareholders and protesters. In many cases, the strategy has worked, with fewer people making the trek to attend far-flung meetings.

"Companies should hold meetings where you get the maximum number of shareholders," says Charles Elson, director of the Weinberg Center for corporate governance at the University of Delaware. "If you don't want people to attend or protest, you choose an inconvenient location."

A few other companies on the move this year:

--AMR Corp., parent of American Airlines, held its meeting in Los Angeles. About 50 flight attendants showed up to protest, nowhere near the hundreds of angry attendants, pilots and mechanics -- upset with executives who take big bonuses while union contract negotiations have dragged on since 2008 -- that AMR usually draws when it holds meetings in Fort Worth, Texas, where it is headquartered.

--Goldman Sachs Group Inc. held its meeting outside New York for the first time, opting for New Jersey. Goldman moved into a new, 43-story, steel and glass building with 2.1 million square feet in downtown Manhattan in 2010, but said an auditorium in Jersey City had more room for shareholders. The space was only half-filled. In the last several years, Goldman's New York offices have been the target of large protests over anger about large payouts for top executives and the company's role in the mortgage meltdown.

--JPMorgan Chase & Co., the nation's second-largest bank, held its annual meeting in Columbus, Ohio. Although the bank has 17,000 employees working there, the most outside of New York, its headquarters in Manhattan has been a target of thousand-person protests. About 400 demonstrators still showed up in Columbus, railing against the bank's handling of mortgage foreclosures.

At an annual meeting, executives make presentations and shareholders elect directors to the board and vote on proposals that require their approval. Investors can also vote online. The meetings are the only forum where many shareholders get to air their views on practices and policies of the company directly to corporate executives and directors.

It can be unpleasant for executives, who often face a harsh audience and tough questions about everything from pay to business decisions. At Bank of America's auditorium in Charlotte, N.C., where the company is based, CEO Brian Moynihan was visibly squirming on stage during the May 11 annual meeting as he tried to hurry 18 people who had lined up on the two sides of the auditorium's red velvet seats to speak to him. Several berated him for the bank's handling of the foreclosure crisis. For example, Liana Molina, an organizer for the California Reinvestment Coalition, a nonprofit group, told Moynihan it wasn't surprising that "B of A is dubbed as Bad for America."

Given such anger, it's no wonder some companies might want to escape, say shareholder activists -- even if it's just across a river. Lance Lindblom, CEO of the Nathan Cummings Foundation, a long time shareholder of Goldman Sachs, says the financial crisis has put a spotlight on the company and led to regular protests outside its New York headquarters. Moving to Jersey City curtails the number of protesters who show up, he says.

"The Hudson River acts as a moat to keep some of them away," Lindblom says.

Goldman's meeting in Jersey City drew about 250 people and fewer protesters than in the past. A Goldman spokesman said the space was more conducive to an annual meeting, but wouldn't say whether there was an auditorium of the same size in the company's new building in New York. Its meeting had traditionally been held a few blocks away from its headquarters.

AMR says it is holding meetings in its "cornerstone" cities, where most of its flights originate. But in the two years since the road meetings began, the move has also had the effect of keeping away union protesters. In the past, hundreds of uniformed pilots and flight attendants would line up outside the annual confab just south of Dallas-Fort Worth International Airport, near the company's headquarters, to protest rich management stock bonuses and labor contract issues.

"In Dallas, you're always going to get a good crowd," says Laura Glading, president of the Association of Professional Flight Attendants. "In LA, we were just hoping to have a presence."

As for Wisconsin's M&I, spokeswoman Sara Schmitz wouldn't say whether the bank has ever held a shareholder meeting in New York. She would only say the bank commonly holds its "business-only" meetings in New York. While shareholders and angry union groups based in the Midwest say the move made it harder for them to attend, the bank didn't avoid confrontation altogether. About 1,000 protesters from local unions showed up at the May 17 meeting, according to attendees.

Companies aren't required to allow questions at shareholder meetings, but most do. Some companies limit the time allotted for questions at their meetings. Others allow for hours of questioning and make their executives available to meet one-on-one with shareholders. For example, Warren Buffett and other Berkshire Hathaway executives regularly answer dozens of shareholder questions over several hours during the company's annual meeting, which attracts some 40,000 shareholders. This year was no different, despite negative news about questionable stock sales by a recently departed executive.

And not every company is running away from home. General Motors will hold its first annual meeting since 2008, its last before it went into bankruptcy and government ownership, and will do so in Detroit. Previously, for more than a decade, it held its meetings in Wilmington, Del. Spokeswoman Renee Rashid-Merem said that besides cost savings by holding the meeting locally, it also showed that GM is committed to its home city. After bankruptcy and a $50 billion rescue package from the U.S. government, the company went public again this year. It's making money and sales are up.

"Given all that the company and our stakeholders have gone through to rebuild General Motors, we felt it was most appropriate to hold our first post-IPO meeting here in Detroit," Rashid-Merem says.


AP Business Writers Tom Krisher in Detroit, David Koenig in Dallas and Kelvin Chan in Hong Kong contributed to this story.

Published: Mon, May 30, 2011