Annual meetings: Prep for disruption
Tips for corporate secretaries
Protesters can cause havoc at an AGM, and corporate secretaries are on the front line in making sure boards cope and corporate reputations remain intact
As the polarized political environment seeps into the investment world, former corporate secretaries and governance experts are urging peers to prepare carefully for possible disruption of their company’s annual shareholder meeting. While some companies may be familiar with animal rights or environmental protesters, and others may recall anti-globalization protests at annual meetings in the past, dealing with disruption at annual meetings is not always high on the long list of a corporate secretary’s annual meeting responsibilities. But professionals say it should be.
‘Opinions vary widely as to whether confrontation at annual meetings is a sign of healthy corporate governance or a distraction from essential business goals,’ writes John Wilcox, chair of Sodali, in a 2013 report published by the Conference Board. ‘Regardless of its merits, controversy at AGMs has become a fact of life for listed companies around the world.’ These days, even small companies can find themselves facing unexpected or lengthy questioning, or being targeted by a protest group, according to professionals.
Preparation, preparation, preparation
‘This is one of the things that needs to be on the radar screen,’ says Doug Chia, executive director of the Governance Center at the Conference Board.
A corporate secretary’s playbook for the AGM usually includes a script for scenarios such as a fire in the building or other emergency – and that script should also prepare for dealing with protesters. As a former corporate secretary at Johnson & Johnson, Chia says he experienced annual meetings that were disrupted by animal-rights protesters and he recommends that corporate secretaries approach the topic of potential disruption as they would any other eventuality at the meeting: with preparation and planning.
For instance, it is a good idea to reach out to media relations officials and others who might monitor social media sites and have insight into whether any groups have announced plans to attend the meeting. Robert Lamm, independent senior adviser at Deloitte’s Center for Board Effectiveness, agrees it is key to try to find out about any planned protests, as it is to stay on top of venue logistics, food preparation and other meeting plans.
‘Most of the time people who are engaging in protest want people to know about the protest,’ says Lamm, who is also of counsel with Gunster and was previously assistant general counsel and assistant secretary of Pfizer. Chia agrees, noting that most protesters just want a chance to be heard.
As well as helping the company’s executives and board prepare for any potentially disruptive protests, surveying feedback on social media can help the corporate secretary get an idea of what questions might come up at the AGM. ‘Understanding your audience is critical to preparing an effective message and gaining support at the annual meeting,’ Wilcox writes in his 2013 report. To this end, he advises companies to analyze their ownership base to try to understand shareholders’ investment goals and better grasp their views on activism and governance.
In addition, it is important to work closely with any company security officials in the run-up to the meeting, Chia advises. The corporate secretary, security official and manager of the meeting venue need to discuss any security screening arrangements, for instance. ‘For the annual meeting itself there are procedures the corporate secretary is responsible for making sure are in place: security at the facility, security in the meeting room, procedures for different situations… Unruly protesters should be one of those things,’ Chia says.
At the same time, a wider legal team may want to sign off on any script that might be prepared to warn protesters or gadflies and make sure they are treated in a way that would not reflect badly on the company. The trick to handling these people is to strike a balance between allowing the person or group its say, without being too heavy-handed in response to any criticism, complaints or questioning the board or executives might feel to be out of place. There can be reputational and brand image consequences to cutting someone off too abruptly or just responding angrily.
‘I’ve actually participated in meetings where unfortunately the chairman has become angry and it just doesn’t go down well,’ says Lamm. Again, the solution is to prepare and rehearse responses.
That said, the company should still be in the driving seat, according to Wilcox. ‘The goal of the AGM should be to initiate and manage the process of change, rather than reacting to external pressure,’ he writes.
Following the rules and sticking to the script
Experts say it is important to make sure annual meeting attendees have a copy of the meeting rules and are clear on the amount of time allotted to speakers. For instance, printouts of the rules can be placed on attendees’ chairs ahead of time.
The corporate secretary also needs to ensure the chair knows the rules and is prepared to stick to them rather than respond personally or emotionally should any comments be targeted directly at board members or executives.
It is a good idea to script a warning for the chair to give to speakers who have gone over their allotted time. A second warning should also be scripted – and perhaps the chair and secretary can rehearse a sign if security needs to be called.
‘At that point it’s really about good judgment and staying calm, and trying not to let the emotion of the moment dictate,’ Chia says. ‘It’s fairly rare that something like this would happen. Usually companies that would have this type of activity know well in advance that it is a possibility.’
Corporate secretaries at companies expecting protesters should also prepare board members for a situation in which they might be directly approached. This is important because it gives the board members insight into how the company is preparing for the meeting. ‘The last thing you want to do is be caught unprepared in front of your board members,’ Chia notes.
With virtual meetings becoming more common, technology and governance will continue to present challenges for corporate secretaries, but there will be no change in the fundamental need for an AGM, some experts say. Although shareholder activism, protests and disruption may ebb and flow, the AGM remains relevant as a platform for communicating with shareholders, whether physically or virtually, they say.
Tips for corporate secretaries
Corporate secretaries should think ahead about how to deal with people who film or otherwise record the meeting. The view held by Doug Chia, executive director of the Governance Center at the Conference Board, is that it might be draconian to take away everyone’s mobile device or phone, but it is good to have some level of forethought or policy on allowing filming at the annual meeting. Corporate secretaries may also be called on to work with company officials if or when any recording of the annual meeting is published, so they should think ahead and figure out a policy, experts say.
The top tip for preparing the chair to handle questions and answers is rehearsal. Generally, the corporate secretary should work with investor relations and others at the company to prepare for questions the chair might face. This is seen as preferable to scripting responses that may or may not apply to the questions asked during the meeting, as that could lead to a chair failing to properly respond to questions or just sounding too, well, scripted. ‘If your answers sound canned that might not be a good thing,’ says Robert Lamm, independent senior adviser at Deloitte’s Center for Board Effectiveness. ‘You don’t necessarily want people to work from the script.’
Systems used for vote tabulation vary depending on the size of the company, but firms should have some idea of what the outcome will be ahead of the annual meeting vote. Lamm expects tabulation to be one area that will change in the coming years as technology develops to make the vote counting process faster and more secure.
Meet the board
‘Traditions of boardroom collegiality and privacy should not prevent directors from engaging with the shareholders who elect them,’ writes John Wilcox, chairman of Sodali, in a 2013 report published by the Conference Board. Lamm agrees that having the board be visible is important. ‘It can be helpful to have the board members facing the crowd rather than sitting in the front row,’ he says, adding that this is a practice he would like to see adopted more widely.
This article originally appeared in the Corporate Secretary ‘Governance and the Boardroom’ special edition.