What to do about the annual meeting? First, a few 'dirty little secrets' about these events, and then some fixes for getting more out of the time and investment put into them--for management, the hoard, and shareholders alike.

• Author: Hagberg, Carl T.
• Position: THE ANNUAL MEETING

BILLIONS OF DOLLARS and countless hours of valuable senior management and director time are spent each year on annual shareholder meetings. Meanwhile, virtually no "professional investors" show up for these events, and fewer individual investors show up with every passing year. At many companies, the number of individual investors who take the time and trouble to vote their proxies is dropping perilously close to zero: This during a time when the need to have "good corporate governance" is getting more attention from activist investors, and from the press, than ever before.

Against this background, one might well opine that the traditional annual meeting model is badly broken ... and maybe not worth fixing either.

Here are a few "dirty little secrets" about annual shareholder meetings and some thoughts from someone who has been attending, writing about and participating in annual meetings of companies large and small for over 40 years--and who does believe they are well worth the fixing. Also to follow are a few suggested "fixes."

What happens? Nothing

Annual shareholder meetings have been required events for publicly traded companies ever since there were publicly owned companies. Having an annual meeting of shareholders is enshrined in state law, in SEC and stock exchange rules and regs, and in the hearts and minds of securities lawyers, proxy solicitors, proxy tabulators, financial printers, mailing houses, hoteliers and various other service providers (including the author, as he feels obliged to confess up front).

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Just shy of 14,000 shareholder meetings were held in 2010 by U.S. publicly traded companies, and roughly a half-billion sets of proxy materials--or notices that such materials are available--were sent off to shareholders last year, according to the latest statistics from Broadridge Financial Solutions Inc., which is involved to some degree or other in virtually every shareholder meeting that is held. That's a lot of meetings, and a lot of paper, and a lot of emailing, which is rapidly replacing paper mailings--which is good news for our overburdened landfills but bad news for printers, mailers, local postal workers and for most of us who are already severely overburdened with emails.

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Aside from the billions of dollars in out-of-pocket expenditures public companies incurred to hold them, these 14,000 meetings consumed an awful lot of very valuable senior management time to prepare for them and to conduct them, which brings us to what we call the first dirty little secret of annual meetings: At the vast majority of them, nothing of significance ever happens.

Typically, the chairman of the meeting reads from a carefully prepared script, which is designed to conduct the "business of the meeting" as quickly as possible and which, most times, is simply to elect directors and ratify the appointment of the outside auditors. No discussion is needed and none occurs. Often there will be a few remarks on the past year's performance and maybe on the outlook for the coming year, and maybe a general Q&A period, but at 12,000 or more of these annual meetings, there will not be more than a handful of non-management stockholders in attendance (often none at all) and not a single question or comment. And, of course, essentially all the votes were cast and the meeting outcomes were decided days in advance. That is one heck of a lot of time and money for a literal non-event that's usually over in a half-hour, and often in a lot less time than that.

Average investors don't care

The second dirty little secret about annual meetings is that not only are fewer and fewer shareholders showing up, more and more of them are failing to cast their votes by proxy. Back in the 1970s, when individual investors held roughly 80% of all U.S. listed stocks, they voted about 74% of time. Today, at many companies as few as 10% of the individual investors are casting their proxy votes in time for the meeting.

Attendees can be time and money wasters

Here's another dirty little secret about modern-day annual meetings that few people (and least of all our SEC meeting-overseers) seem to want to deal with: A large number of the people who do show up at them are, to put it kindly, out-and-out coo-coo birds.

Some have nothing better to do, and wander in for the free coffee and Danish. Others--the professional gadflies who, under current SEC rules are allowed to file the same tired old shareholder proposals year after year--end up wasting significant amounts of management time, shareholder money, and the valuable time of "regular shareholders" who may be there, as they hog the floor to "introduce" their proposals (which are already introduced in the printed matter, along with the company's official response, please note) and to ask a question or make their own personal comment on every other matter that may come up. Ouch!

Time to ditch the 'annual' aspect?

A few years ago, we floated the idea that maybe an annual meeting of shareholders is just plain dumb. After all, we elect the president of our country to serve a four-year term and our representatives and senators to serve two...