Platt Perspective on Business and Technology

Stockholder meetings, annual board meetings and annual meetings best practices 2 – a case study example

Posted in job search and career development by Timothy Platt on March 6, 2012

This is my second installment in a series on corporate and organizational meetings that by their very nature serve as more public interfaces too – and windows into the operations and practices of that business (see Part 1: starting a new series. In Part 1, I outlined a standard procedural model as to how these meetings: stockholder meetings, annual board meetings and public-facing annual meetings are held and what they include. As a part of that, I made note of some of the core organizing principles and values that these meetings are supposed to represent and I repeat a brief passage from that posting here as a starting point for further discussion, as three bullet points:

• When an organization’s senior executive leadership and board come together to represent the organization in this type of forum they need to do so with a clear and convincing message of transparency and accountability, and one that is as genuine as it is apparent.
• For these meetings to work they have to provide opportunity for feedback that is listened to, and from the floor of the meeting itself and from online and mail-in shareholder participants.
• All such participants should have a genuine voice of a type that requires their having access to sufficient information to make informed choices. Slanted and biased informational resources rob the shareholders of a genuine voice or of opportunity to have one.

I always focus on developing and sharing best practices in the postings and series of this blog, but at the same time I have repeatedly noted that our best and most compelling teachers can be the negative examples that prove by their actions and results, the consequences of getting it wrong. And our most lasting and impactful lessons can be in thinking through how to do better. I have seen this in my own experience working with less than successful managers and leaders, and in gathering lessons learned from colleagues. I have seen this in faulty and disconnected business practices and technology implementations and in a variety of other contexts. I take this same approach here, and add that the case study I will be discussing here is in very large measure my reason for writing this particular series at all. This one represents a lessons learned experience that I continue to learn from and that has forced me to think through public-facing meetings in general in whole new ways. And I begin here by setting the stage.

I have attended and participated in these meetings in a variety of capacities – as a senior executive or board member in the front of the room and as a shareholder/stakeholder participant out in the audience. In this case I was a shareholder out in the audience. And the organization in question was and still is a Fortune 500 – a large US based multinational in banking and insurance. In its current form it is in fact the product of a merger between a major insurance corporation and a major bank with their constellations of functional operations, each of which was a Fortune 500 company on its own. And they held an annual stockholders meeting in New York City at a suitable venue and I attended, as did a great many others – individual investors such as myself and portfolio managers who are responsible for pension plan investments and other large-scale holdings.

This meeting took place as our recent Great Recession was really sinking in and as the news started picking up on the hows and whys of our banking system failures with the home mortgage fiasco and lending bubble and so much more. And this meeting took place in mid-winter and the numbers were out that this combined organization had lost well over $10 billion in value over the preceding four business quarters, and with prospects of much more red ink to come.

I have already written about the sometimes toxic relationship between boards and executive suites where members of the executive suite of one company sit on the board of another and vice versa – as a simple two company example. And they, in a “disinterested and objective” manner, set each other’s senior executive compensation rates, and with effectively-owned third party reviewers overseeing this process as they add their seals of approval (see Boards of Directors and Accountability.) This corporation participated in that type of compensation rate network, and as a part of their package, this included a very anemic and easily reached set of standards according to which its senior executives would be eligible for year-end performance bonuses. They lost over $5.9 billion in red ink in the last quarter of the immediately preceding year alone so even by their formally approved standards they were not eligible for any of this. So they dispensed with receiving bonuses before the end of the year and in January immediately rebranded this payout from performance to incentive bonuses and gave themselves even more. And this happened on the eve of this stockholders meeting in February. Basically, what I am saying here is that the leadership of this organization set themselves up for a very contentious meeting with troubling and even legally questionable behavior going in and with the business in real financial trouble that was clearly going to continue, and certainly through that full coming year. There was even talk of breaking this combined organization up, though that did not happen as later events unfolded. Still, no one that walked into that room was happy with this business, its leadership or its practices – and definitely not with its performance.

I outlined the basic structure of a meeting of this type in Part 1 and they followed that basic script fairly closely as to what steps were included and in what order. But the people at the front of this room had very little positive news or outlook to share with the audience sitting in front of them in that large auditorium. And they knew that many if not most of the people present would have been happy to see all of them dismissed and replaced and certainly after the way their bonuses were maneuvered through – in the midst of all that corporate performance red ink.

Transparency was not on the table. Accountability was not allowed in as the issues raised by shareholders to be voted on, and the board elections coming from Corporate were all already decided and as status quo decisions. And then when the microphones were on and members of this audience stood to ask questions and express opinions a specific incident occurred that brought the dysfunctionality of all of this into sharp focus.

People were getting up to ask difficult and challenging questions. And a pension funds manager for a large union was at the microphone talking about the people he represented and what this company’s performance was doing to their futures – his funds included many hundreds of thousands of shares of this business. And his microphone was cut off in mid-word and he was told that his allotted time to speak was up. The audience present responded with an uproar and the CEO of this company backtracked, saying it was all a misunderstanding and the microphone had accidently cut out – that it was not intentionally turned off. Nothing positive followed through the end of this meeting. And the next day I moved all of my business out of this bank where I had held accounts for many years. And I recommended to my consulting clients that they do the same, and why.

This bank is still there and its CEO is still in place along with many of the members of his then senior executive team. The makeup of their board is basically the same. But for me this shareholder’s meeting marked a turning point for the organization, and one that its leadership had not planned for and would not have wanted.

Annual shareholder’s meetings have real meaning and even if they are often treated more as ritual than functionally significant substance by the organizational leaders who host them.

I have at least touched upon this non-working example several and even many times in my writings since then and as I said towards the top of this posting – this is one I continue to learn from. I am going to turn in my next series installment to discuss some of the positive lessons I have learned from this, as well as from other such meetings I have attended and participated in – most I add more positive and effectively managed. And my goal in that is going to be one of outlining ways to move words such as transparency and accountability out from simply being catch phrases and marketing jargon and into actualized operational policy and practice. Meanwhile, you can find this posting and others of the series at my Guide to Effective Job Search and Career Development – 2. I have also posted extensively on jobs and careers-related topics in my first Guide directory page on Job Search and Career Development.

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