After recently buying stock in the Walgreen Co., Richard Best of LaGrange decided to attend the company’s annual shareholder meeting this spring to make sure he’d made the right decision. The company’s longtime CEO had just retired, and Best wanted to hear his successor speak.
Best, a retired advertising copywriter, says seeing and hearing the company’s officers in person confirmed, in a way that an annual report never could, that he had made the right stock purchase. Over the years, he has attended annual meetings for at least two other companies in which he holds stock.
“My main concern is, do they make sense as far as their future growth is concerned?” he says.
Best is among the minority of individual investors who attend companies’ annual shareholder meetings. Most pass them up because of a lack of time, a lack of interest or a meeting’s distant location. If you’re a shareholder in a company, or are thinking of becoming one, you may be wondering: Should you go to the annual meeting?
The answer depends on several factors: Are you a large shareholder in the company? Is a significant portion of your portfolio invested in a company’s stock? Have their been significant changes in the company’s performance or leadership over the past year?
If the answer to the first question is yes, then you obviously should go. Anyone who has a major portion of their portfolio invested in a corporation should attend the annual meeting, “just so they can keep a handle on who’s running the show,” says Nancy Coutu, president and owner of Money Managers Advisory Inc. in Oak Brook.
If you are a small investor, some money managers say it’s OK just to read the company’s annual and quarterly reports for straightforward information.
“It depends on the degree of detail that someone wants to analyze a company as an individual investor,” says Wayne Stevens, managing director of the Dearborn Partners LLC, an investment management company in Chicago.
Going to a meeting can be more telling than simply reading annual reports because you can “actually hear the management for yourself, detect the nuances, the sense of enthusiasm, the emphasis on certain components of the business that they want to expand and contract,” Stevens says. “You can also see what’s on other (shareholders’) minds, which is very important.”
But Thomas Flanagan, president of the Investors’ Rights Association of America, a shareholder rights advocacy group, is adamant that individual investors attend companies’ annual meetings.
Any shareholders who think they don’t make a difference at these meetings are “part of the problem,” he says. “If (shareholders) don’t go, they don’t ask the tough questions. If they don’t ask the tough questions, then management can get away with murder.”
During typical annual meetings, the company’s leaders will discuss past performance and future direction. There is usually a question-and-answer session, followed by an informal cocktail hour or coffee break. Good managers try to meet with shareholders one-on-one before and after the meeting to talk informally.
Flanagan recommends that during the question-and-answer session, shareholders should voice concerns about broad management decisions rather than wasting time on minutiae.
“You can get almost any question answered,” he adds. “You can ask really specific details, such as what were to happen if they merged with another company. Their accountants are usually in the audience and could provide a full explanation of a merger.”
Another way that individual investors can make a difference at annual meetings is through shareholder resolutions. The Investors’ Rights Association has helped sponsor more than 250 shareholder resolutions to public companies over the past three years. Some have proposed eliminating outside directors’ pensions or creating a board of directors with the majority of members independent of the company.
To date, the group’s resolutions have helped to spur companies like Alexander & Alexander and B.F. Goodrich Corp. to stop giving pensions to outside directors.
“Sometimes small shareholders feel they don’t play a part in Corporate America, but our group shows they’re wrong,” Flanagan says.
Attending a shareholders meeting also gives an investor the chance to find out if management plans to make any significant changes that might affect the company’s stock in the future, says Bob O’Hara, vice president of development for the National Association of Investors Corp., an educational group for individual investors.
“That is the single biggest area where some of our members like to concentrate on at annual meetings: They like to compare what was said this year to what was said the year before,” O’Hara says.
If there are sensitive issues coming up for a vote during a meeting, an investor may want to attend to get a feel in person for how management is handling those concerns.
“We tell people that you’re not investing in the market, you’re investing in the company–more specifically in the management of the company,” O’Hara says.
In recent years, shareholders seem to be taking less of an interest in attending annual meetings since more and more up-to-date information is available on the Internet, says O’Hara.
“We hear a lot of people saying, `Gosh, why should I go across the state and listen to someone, when later this afternoon the text of the meeting will be on-line?’ ” O’Hara says.
Other shareholders dismiss annual meetings because they seem largely a sales presentation for the company.
“This is the company’s chance to woo the investors,” Coutu says.
“(Shareholders) have got to keep that in perspective. (The company) wants them to feel good as investors, to stay investors and to buy more stock.” But it’s important for shareholders not to wait until a company is in trouble to attend the annual meeting, Flanagan stresses.
“Shareholders who are content tend to do nothing until there’s a problem,” he says. “But by that time, it could be too late.”
For more information, write to the Investors’ Rights Association of America, 366 N. Broadway, Suite 410, Jericho, N.Y. 11753. Its Web site is www.iraa.com.
To receive a free educational kit about investing, contact the National Association of Investors Corp., P.O. Box 220, Royal Oak, Mich. 48068; 248-583-6242. The association’s Web site is www.better-investing.org.
