Are companies prepared to face a new kind of activist?
Directors and shareholders are not the only ones gearing up for annual meetings this season. It seems the protesters are back and this time they have launched a string of confrontations at some of the country’s largest corporations.
Calling itself 99% Power, the group is an offshoot of the Occupy Wall Street movement. Members plan to gather inside and outside more than three dozen shareholder meetings to challenge ‘1 percent board members and executives,’ says their website.
This week the movement made its debut at Wells Fargo’s annual meeting, which spiraled out of control. According to the Huffington Post, the meeting came to an unexpected halt after demonstrators claimed proxy votes might be invalid because the bank acted illegally in prohibiting some shareholders from attending the meeting. Around 24 were arrested.
But it did not end there. Yesterday 99% Power went to GE’s annual meeting to protest the company’s low tax rate. Those who made it into the Detroit building where the meeting was held were quickly escorted outside to join hundreds of other protestors.
The group says that it plans on making its presence felt at other companies such as Sallie Mae, Wal-Mart, Bank of America, Verizon and others.
‘You have to make sure the annual meeting is not disturbed by these protests,’ advises Steve Shapiro, a partner at Pircher, Nichols & Meeks. ‘Companies spend a lot of time preparing for these meetings and getting ready for tough questions by shareholders.’
Shapiro urges companies to try to keep separate their engagement with shareholders and any confrontation with protesters. ‘Most companies provide options to stakeholders who wish to participate in constructive dialogues and this type of communication can get a message across,’ adds Shapiro.
Purposeful shareholder engagement is on the rise this proxy season. A recent Ernst & Young report says 25 percent of companies are disclosing shareholder engagement efforts around say-on-pay votes. ‘Companies made targeted pay reforms based on shareholder feedback, and followed up by communicating those pay changes and engagement efforts in the proxy statement,’ the study reports.
‘This new governance system allows more questions to be asked by shareholders and in this fashion, companies can react better to concerns,’ Shapiro adds. ‘This type of engagement should be supported and not harmed by protests.’
Few companies can afford to ignore the prospect of annual meeting disruptions. ‘Are these protests a one-year phenomenon or will they happen again in 2013? You can never tell so it's best to factor in these events when preparing for a meeting,’ Shapiro concludes.
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