In the days of increased corporate governance and shareholder transparency, the annual shareholder meeting can often be a pretty good indication of how shareholder focused a company is. A recent book I read was A Weekend With Warren Buffet and Other Shareholder Meeting Adventures that provided a light and easy read into 22 shareholder meetings the author attended.
Each of the annual meetings the author attended were evaluated based on 5 different items: educational value, entertainment value, freebies, food & drink, and insight. The first 5 are obviously for more fun than utility and may or may not provide any insight to how things are done at the company. The author’s insight is where the learnings are highlighted and the differences among companies varies greatly. The real value in the book comes from the understanding one gains about how each company treats its shareholders. I will present two vastly different approaches covered in the book.
The good annual shareholder meeting: Berkshire Hathaway
The best annual meeting discussed in the book is by far the annual meeting held by Warren Buffet and Charlie Munger on behalf of Berkshire Hathaway. At this meeting your truly feel like a partner of the business. The author describes the meeting as follows:
Warren Buffet fans have called Berkshire Hathaway’s annual shareholder meeting “an MBA in a day.” That’s because the legendary all-day Q&A sessions feature two extremely bright men – Buffet and Charlie Munger – holding forth not just on details about the company, but about business and the world in general. It’s like sitting on the porch with two kindly grandfathers, both eager to help you succeed beyond your wildest dreams. There’s truly something for everyone here, and it’s a safe bet that every attendee – whether professional portfolio manager or a child who makes money mowing lawns – learns to be a better investor (and maybe even a better human).
Obviously Berkshire cares about its shareholder. I beleive share price performance is partially tied to this openness. On the flip side of Berkshire is Playboy who has some work to do in running its annual meeting.
The brutal shareholder meeting: Playboy
Everyone knows what Playboy is. Not many know that you can buy stock in the company. I am here to suggest, that based on how the annual meeting is run, that it might not be the best investment one can make. In a nutshell, the company is very closely held and decisions are made for the primary holders of the stock, and not for all shareholders. The author describes it as follows:
If a company thinks the shareholder meeting has outlived its usefulness, it’s easy to turn that view into a self-fulfilling prophecy. Putting on a dull show will discourage return visits – even if the company itself is know for wine, women, and song. When a company is closely held (most shares in the hands of one person or group), management can do whatever it wants. Sometimes going along for the ride can be rewarding; sometimes not. But it’s hard to feel like a real partner in the business if the company’s representatives point-blank confess that the one day they’re supposed to talk with you is a waste of time.
Doesn’t make you want to invest in the company does it. And perhaps you shouldn’t. That is not for me to say, but if the company runs its shareholder meetings in this manner, than I am going to be very cautious about putting my money into it.
Overall. the book was a very interesting and fun read. Although it is written in a light and non-serious manner, there is a lot to learn from the book. Companies that know how to treat shareholders well will make for better performing investments in the long term.