Updated: May 3, 2013 12:14PM
Originally published: April 22, 2004
This is the season for “shareholder democracy.” It’s your chance to make your voice heard in the world of corporate governance. The easiest way is to vote your shares. Or you can make the extra effort to attend the annual shareholders meeting to cast your ballot in person, and perhaps be chosen to ask a question.
Even if you have only a small number of shares, your vote and your voice matter -- especially when many shareholders also take action.
You can start by reading the annual report, instead of tossing it in the trash. If you own stocks, your mailbox is probably full of annual reports and proxy voting forms. Corporate America spends hundreds of millions of dollars each year mailing reports to shareholders. And several Web sites, listed below, allow you access to annual reports, even if you aren’t a shareholder.
Annual reports are full of glossy photos and sincere letters from the chairman, either apologizing for or extolling the company’s performance. But there’s a lot more in that annual report, and in the proxy voting statement that goes with the report. So take the time to dig deeper -- even if you don’t understand financial accounting.
Start at the back
Skim the photos, and jump directly to the back end of the annual report -- the part that contains the balance sheet and income statement. Start by comparing the figures on the top (revenues) and bottom lines (net income) to last year’s numbers. And then scan down the accounting categories to if see there are any big changes from the previous year. Be sure to check the footnotes. They’re often more enlightening than photos or graphics.
The real opportunity for shareholder democracy is in the smaller booklet that accompanies the report, along with a ballot and return envelope. It’s called the proxy statement, and it gives you information on items the company asks you to vote on.
You’ll be asked to approve the election of directors. Check the fine print to see which directors own how much stock in the company, and their track record for attending meetings. Companies also ask you to vote to approve their choice of audit firms. And they may also ask for approval of new compensation and option plans -- often very revealing.
Take the time to mark your ballot and return it. Or follow the instructions, and vote online or by telephone number. This is your only voice to management -- other than selling your stock. So be sure to use your vote.
If you’d like to get a company annual report, there are several Web sites that allow you instant access. Go to www.ReportGallery.com, or www.AnnualReportService.com or www.pras.com (the Public Registrar’s Annual Report Service). These Web sites will allow you to search out individual company reports, either alphabetically, or by industry or state.
If you haven’t attended an annual meeting, it’s almost worth buying a few shares of stock in a local company just to have the experience. Many people bring children and grandchildren for a close-up look at the management of companies they own.
During the annual meeting you may have a chance to ask questions of the chairman. Some people posing questions are representatives of shareholder advocacy groups. Management usually knows in advance the causes they represent and the questions they’re likely to ask.
But ordinary individual shareholders get their chance to be heard as well. Make your moment count by asking a simple, straightforward question, not by giving a speech. Wait for a microphone to be brought to you. And to have a better chance of being chosen, sit on the aisle -- and dress conservatively!
Try a written question
If you’re not called upon, you can always put the question in writing, and include your name and address. Management makes a point of responding to shareholders who care enough to come to the meeting. And shareholders who don’t like the performance of management at those meetings get a valuable insight into why they should sell their stock.
When you think about the billions of dollars that trade each day in the stock market, it’s easy to lose sight of the fact that the owners are the individuals who purchase shares or invest through their pension and retirement plans. Using your vote and attending annual meetings is more than a lesson in shareholder democracy. As we’ve seen recently in companies ranging from Disney to Hollinger International, when a lot of shareholders, individual and institutional, decide to speak up, corporate policies can and will change. That’s the Savage Truth.
Terry Savage is a registered investment adviser, and appears weekly on WMAQ-Channel 5’s 4:30 p.m. newscast. Distributed by Creators Syndicate.