The Directors & Boards survey: the effectiveness of annual meetings: from how important the annual meeting is as a governance tool to technology alternatives and even to whether the annual meeting should he eliminated, the Directors & Boards audience 'voted their proxies' for our survey.

• Author: Shaw, David
• Position: ANNUAL MEETING SURVEY

ANNUAL MEETINGS are a relic of the past." That's how one director respondent to the Directors & Boards survey on annual meetings put it. And it's no surprise that, according to our survey, the role of annual meetings in corporate governance remains controversial. While the governance community as a whole finds the annual gathering of shareholders to be a valuable corporate governance tool (this includes responses from public, private and nonprofit directors, as well as executives, corporate governance advisers, and shareholders), there is a fairly large schism between the attitudes of public company directors and shareholders. Seventy percent of shareholders (institutional and individual) find the annual meeting to be very important and 20% somewhat important as a governance tool, while 36% of public company directors say the annual meeting is not very important, and an equivalent number rate them as only somewhat important.

Interestingly, we find that private company directors are much more likely to find annual meetings important as a corporate governance tool, but this makes sense, since attendance at private company annual meetings is limited to shareholders who likely hold significant ownership in the company.

The reasons behind the public company director attitude toward annual meetings is shaped by several factors:

1. The perceived hijacking of meetings by gadflies and small shareholders. As one director put it: "Setting time limits on questions (so people don't use the question time to make speeches) would help some of the larger companies." Another suggested that "the issues of shareholders should be made pro rata with their equity holding."

2. Low attendance, especially among institutional shareholders. According to our survey, only about 31% of share ownership is represented at an average annual meeting, and public company directors think the number is closer to 15%. A director respondent noted that annual meetings "will not improve until institutional shareholders participate." Another noted: "Shareholders who have a real stake in the company could actually attend annual meetings and not relegate attendance to those who submit proposals or who only raise personal issues that are not meaningful for shareholders generally." One director suggested that companies "require attendance by large shareholders in order to have a vote."

3. Shareholder participation. Of those shareholders who do come to the annual meeting, many directors...