Business   Basics for   Engineers  by   Mike Volker

The Annual General Meeting (The "AGM")

The Stakeholders' Annual Event

Companies, especially publicly traded ones, are required by law (in most jurisdictions) to hold an annual general meeting (the "AGM") at which stakeholders* are invited to attend and vote on corporate matters. It is at this meeting, that

(*Note - the term "Stakeholder" is used synonomously with the term "shareholder". In the case of non-profit organizations, which also hold AGMs, this term may be more appropriate since it is more generic and refers to members and others who are not necessarily shareholders in the true sense of the word.)

Corporate Governance

The Duties of a Shareholder

Should I Attend an AGM?

Other Alternatives - What's a Proxy?

Stakeholders may vote by "proxy". A proxy is a "substitute", i.e. you are authorizing someone of your choosing to vote on your behalf.

Some complications...

Have you ever seen a "proxy solicitation" form sent out by a company to its shareholders? You'd almost think that this was a plot by regulators to ensure that little voting is done.

The Shareholder Registry

Registered Shareholders and Street Certificates

For practical reasons in dealing with public companies, shares owned by an investor may not be registered in the name of the investor. For example, if you buy 1000 shares of Nortel through CIBC Wood Gundy, those shares will be held in a CIBC account for your benefit. The shares may be registered in the name of CIBC or they may be registered in the name of a broker or clearing agency. The certificates may be endorsed and may be in a "street" form, i.e. negotiable on the street - like a cheque which has been endorsed by its owner. This makes the trading of shares simpler in that they do not always have to be tracked as to their beneficial owner. However, as a shareholder, you have the right to ask that the shares be registered in your name and delivered to you. In fact, shareholders often ask that this be done. They may like the idea of putting away a certificate for safekeeping, being registered, or the "prestige" of ownership. Sometimes shareholders demand certificates in a short sale squeeze. This may happen when a stock is heavily shorted. By demanding the "certs", shorters may be forced into the market to buy shares in order to make good on the delivery request. This will serve to work against the shorters by driving prices up...but that's another subject!

The Transfer Agent

An organization like a bank trust company, may be engaged by a company to independently keep track of who owns how many shares.

AGM Shenanigans

AGMs can be very boring and dull. Sometimes, especially for small ASE or VSE-listed companies, the meetings may take place in the Company's lawyer's Board room and be attended only by a handful of people - with most of the voting (hopefully!) taking place by proxy. In cases of larger companies with a broad shareholder base and institutional investors, AGMs can be very colorful and entertaining.

Here's a few real-life examples. MacMillan Bloedel, a forest products company, usually has uninvited participants (non-shareholders) making noises about environmental issues. At one such meeting, a protestor said, "We will light the world on fire the moment you try to blast a road into those valleys. It will be ugly. I promise you that!". Now, that raises a question: Are AGMs open to the public just because the company is a "public" company? No. AGMs are for meetings of shareholders only. However, AGMs are sometimes crashed. In cases of tight security, a person could gain access simply by owning 1 share in that company, or by having a proxy form in hand. I recall one case where there were many contentious issues to be discussed. In this case, attendees were very carefully screened and reporters, for example, were refused admittance.

The Irwin Toy company has many junior (i.e. children) shareholders and encourages them to attend its AGM. At one meeting, an 11-year old girl asked: "How come all my stocks on the TSE have gone up in the past year and Irwon has gone nowhere?".

Some individuals, such as self-professed corporate watchdogs, will attend AGMs to serve in (what they believe to be) the public interest. For example, Bob Verdun, an Ontario rural newspaper publisher attacked directors at a Southam Inc AGM saying that he found it appalling that, as directors, they owned fewer shares than he did. Another notorious shareholder is Yves Michaud who loves to attack Canadian banks. At a CIBC AGM, he held the microphone for three hours with his questions. Eventually, Chairman Al Flood cancelled his speech and left copies of it for those who were interested.

At a Canadian Tire AGM, one shareholder complained that the bagels being served were stale. Company CEO Stephen Bachand's response was swift: "why don't we hold the meeting at a deli?"

And, sometimes shareholders who feel that they have been screwed have their chance to chide directors, i.e. those they have entrusted to create value, in public. The ill-fated Royal Trustco Ltd. Board faced four hours of bitter questionning from over 1500 shareholders at its last AGM in 1993.

Finally, in the high tech sector, shareholders have recently been critical of Corel Chief Mike Cowpland, asking him to consider stepping down as CEO to make way for someone who'll deliver on promises.

Now, see what you've been missing?

The Bottom Line - for Directors

Summary