Managers to Owners: Shut Up
April 24, 2005
shareholder meeting season again: that Groundhog Day moment when executives
emerge from their rarefied world of corner offices, corporate jets and
staffs of yes-men, to meet the company's owners and field their questions.
For all their shortcomings, these annual meetings are the only time when
democracy begins to enter into the investor experience today.
But even that may be
too much for Weyerhaeuser, the giant forest products company based in
Federal Way, Wash. At its annual meeting last Thursday, the company's board
and management broke with their longstanding tradition of taking shareholder
questions from an open microphone on the floor. Instead, they required that
shareholder questions be submitted in writing, either before or during the
meeting. And Steven R. Rogel, the company's chief executive, announced that
his directors and managers would devote just 15 minutes to answering the
It's a disturbing
precedent to abolish the single spontaneous interaction that executives -
who, after all, are hired help - have with their owners every year. But
Weyerhaeuser went even further, according to an investment manager who
attended the meeting, by gaveling down several shareholders who tried to ask
questions from the floor. And when management cut short the answer period
and a proxy holder stood up to make a point of order and ask why, a beefy
security guard removed him from the meeting.
"It was a show of
force that shareholders should be seen and not heard," said Bruce T.
Herbert, president of Newground Social Investment in Seattle, the man who
was escorted from the room. "I have never been to an annual meeting that
didn't have Q.& A."
To be sure, companies
are not required by law to answer shareholders' questions from the floor at
annual meetings. And it is certainly understandable that companies want to
rein in gadflies and disruptive questioners whose agendas do not match those
of most shareholders.
Still, controlling the
give-and-take between shareholders and executives that occurs just once a
year and lasts for only a few minutes does seem rather Kremlinesque.
Frank Mendizabal, a
spokesman for Weyerhaeuser, said: "What we were trying to do was ensure the
meeting was orderly and that as many questions as possible were answered.
It's a business meeting, not a forum for special interest groups."
He said the company
answered 12 of about 30 questions that were submitted and that it planned to
communicate its responses to the remaining queries, though he said he did
not know how it would do this. He added that Weyerhaeuser had not decided
whether it would stick to the written-question format at next year's
meeting, but that more questions were answered this year than in previous
years when they came from the floor.
One question that Mr.
Herbert hoped to ask of Weyerhaeuser management was how it planned to
respond to the decision last Wednesday by Calpers, the big California public
pension fund, to put the company on its focus list of corporate laggards.
Calpers said it included Weyerhaeuser on its list primarily because it has a
so-called classified board, meaning that its directors are elected in
different years. That structure makes it easier for the company to combat a
takeover and makes directors that much more entrenched. A majority of
Weyerhaeuser shareholders voted to declassify the company's board in 2000,
2002 and 2003, and again this year - to no avail.
Weyerhaeuser prefers a
classified board, Mr. Mendizabal said, because "we have to plan effectively
over a long term and a staggered board assures that directors will have
long-term experience and understand our business."
"We were certainly
surprised and disappointed that Calpers took that action," he added. "We
pride ourselves on our ethics and corporate governance."
meeting was well attended, Mr. Herbert said. He estimated that more than 500
people were in the audience at company headquarters, and he said that there
was considerable tension in the room.
While it is surely no
fun for executives to submit to questions about their performance, their pay
or their companies' practices at annual meetings, it should be considered
part of the job. Shutting off the microphone allows them to close their ears
to shareholder concerns and helps keep them comfortably insulated from the
And because there are
typically time limits for each shareholder question at an annual meeting,
the events usually end quickly. Weyerhaeuser, for example, limited
questioners to three minutes in past years. The pain for executives, if
there is any, doesn't last too long.
IT'S the only time,
once a year, when you can actually ask the C.E.O. or a member of the board
of directors a question," said Adam M. Kanzer, general counsel and director
of shareholder advocacy at Domini Social Investments. "One day a year
doesn't really seem like too much to ask for."
executives and board should be applauded for letting investors know where
they stand. Why should executives pretend, even for an hour a year, that
they care about their owners' views?
Daniel J. Steininger,
chairman of the Catholic Funds, a mutual fund company in Milwaukee, said the
action by Weyerhaeuser looked like an attempt to gag shareholders. "This is
the first time I've ever heard of anyone cutting off debate," he said. "Is
there no limit to their failure to recognize who owns the company?"
Weyerhaeuser move even more perplexing, Mr. Steininger said, is the trend in
recent years among many corporations to argue that they should receive the
same rights that United States citizens do, such as the right to free
are arguing for constitutional rights, how can they turn around and say to
the shareholders who own them you have no right to speak?" he asked. "I just
love the hypocrisy."
The New York Times