Latest Investor Gripe? Lack of Annual Meeting Webcasts
Think of webcasts as the C-SPAN of shareholder democracy.
Annual meetings are often sleepy affairs, where directors are easily re-elected and compensation packages are approved without a hitch, and many banks don't broadcast the forums online. About half of U.S. banks with more than $50 billion in assets — including Comerica, Fifth Third Bancorp and U.S. Bancorp — did not offer a real-time feed of their meetings this year.
As a result, some investors are insisting that more banks offer webcasts, insisting that doing so would improve corporate governance.
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"There's really no excuse why the top 50 banks shouldn't do it," said Mark Ruh, a managing director at Commerce Street Investment Management in Dallas. Ruh described a dearth of webcasts as "symptomatic" of broader transparency issues.
Other industry observers agreed that the absence of live recordings can raise questions about what took place at the meeting. While most are uneventful, the forums provide a venue for investors to air grievances directly to management and the board, which increases the odds of conflict.
"There's only one time a year when investors can ask questions of directors and hold them accountable," said Mike Mayo, an analyst at CLSA. Companies that refuse to webcast their annual meetings "are implicitly saying that their directors are not saying anything material."
Offering webcasts would increase convenience for shareholders. It would also give investors a chance to learn how votes turned out in real time; many smaller banks wait for up to four business days before filing a regulatory document revealing the meeting's results.
Investor frustration is increasing at a time where activist is also on the rise.
At Comerica's annual meeting in April, webcasting was one of the issues investors raised. Several of the $69 billion-asset company's biggest shareholders attended the meeting to confront management and directors about its sagging returns.
The meeting, held in Dallas, was a heated event that could be witnessed only by shareholders who were willing to make the trek. That's an "enormous issue," said Mayo, who was present.
Comerica has not offered a webcast for nearly a decade, spokesman Wayne Mielke said in an email. "We look at the industry in that evaluation," he said, noting that several of Comerica's peers don't offer a webcast.
To be sure, the industry's largest banks — often the target of public ire — streamed their meetings for all to see.
Those who tuned into JPMorgan Chase's annual meeting were able to hear activists push for a breakup of the banking giant, among other proposals. They also heard Chairman and Chief Executive Jamie Dimon share his thoughts on a long list of topics, including the company's prospects.
A bank's management team is responsible for determining whether or not a meeting should be webcast, said David Baris, a partner at the law firm BuckleySandler and president of the American Association of Bank Directors.
"There are no rules on this," Baris added. "It's a function of the shareholder base, the attitude of the bank and how they view shareholder meetings."
In other words, it's largely a question of management style.
There are several reasons banks might choose not to webcast, industry observers said.
Smaller banks may lack the resources or technology necessary to make it happen. Executives may also want to avoid a live broadcast that could include disruptions from hecklers and protestors, which were regulator occurrences at larger institutions in the wake of the financial crisis.
UMB Financial in Kansas City, Mo., doesn't webcast its meeting, but it does provide a recording of the gathering by the end of the day. While there were no protests, this year's meeting certainly provided its fair share of entertainment value, demonstrating the unpredictable nature of such forums.
One man stood up and complained that he couldn't find the meeting. An elderly man — who, it turned out, wasn't an investor — asked to fill out a ballot in person, forcing Mariner Kemper, the $19 billion-asset company's chief executive, to tell jokes from the podium to pass time while others sorted through the confusion.
UMB also has a "raving fan" who shows up annually. This year he stood up at the end of the meeting and proclaimed, "So it ain't broke!" His outburst was rewarded when Kemper tossed him a UMB T-shirt.
"Oh my god, five years ago, nobody would say anything," Kemper said in a recent interview. "It gets weirder and weirder every year. It's just snowballing."
A number of banks have simply never arranged for a webcast and, in many instances, haven't received a request from shareholders to start doing so.
That's the case at the $124 billion-asset M&T Bank, said spokesman Michael Zabel. This year's annual meeting took place in the Buffalo, N.Y., company's cafeteria, and most of those in attendance were employees, he said.
The $142 billion-asset Fifth Third, meanwhile, has traditionally preferred in-person meetings with investors, said spokesman Sean Parker, who added that the Cincinnati company could consider a webcast in the future.
Investors aren't completely sold.
"Banks look to check the box at the annual meeting," Mayo said. "That's not the way it should be."
Banks that decline to provide a webcast are missing an opportunity to tell their story, Ruh said. At the same time, they are raising unnecessary suspicion among shareholders.
"The truth will set you free," Ruh said.