Bank of America meeting: Will investors even be allowed in?May 8, 2012: 5:40 PM ET
Shareholders were kept out of Wells Fargo and Peabody Energy's annual meetings, in what has been a concerning trend this proxy season. Will we see a repeat at Bank of America?
FORTUNE -- This is turning into a very different kind of shareholder season, one that is every bit as much about civic concerns as it is about the price of any stock, as investors have been denied admission to their own annual meetings amid concerns over surrounding protests.
Bank of America (BAC) will be stepping into the batter's box at its annual meeting tomorrow. Anticipating protesters, Curt Walton, city manager for Charlotte, declared BofA's annual meeting an extraordinary event, giving police enhanced rights of arrest.
The event may indeed be extraordinary if it resembles the April 24 Wells Fargo (WFC) and May 1 Peabody Energy's (BTU) meetings. At those meetings, some shareholders were kept outside because of troubling admissions procedures. But annual meetings are an important shareholder right. "The only element that legitimizes the power of large corporations is their accountability to their owners. Any dilution in the effectiveness of this accountability has the effect of removing a legitimate role for business in American society," says Bob Monks, founder of LENS Investments.
On April 30, Bank of America CEO Brian Moynihan received notice from a coalition of 10 groups, including corporate watchdog Common Cause, wanting to ensure that the bank's meeting tomorrow will welcome all shareholders. The coalition requested a meeting by May 4 to discuss Moynihan's plans to prevent a repeat of what happened at Wells Fargo. As of yesterday, Moynihan had not responded to the coalition's letter. A Bank of America spokesperson told me he had not seen the letter, although press reports indicate he knew of it.
Delays and denials at Wells Fargo
At Wells Fargo's meeting, SEIU executive board member Stephen Lerner arrived two hours early, but he was not allowed to cross police barricades the whole time and never gained entry, he told me. He kept traveling to different entrances and asking how he could gain admission, he says. When he saw people entering without stock credentials, the police told him they were service people assisting with the meeting. Others who gained entry flashed ID badges and appeared to be employees, he says. Lerner went to an entrance where police had told him to go, but they never let him line up to attend the meeting, he says. Lerner works with the coalition that sent the letter to Bank of America, which calls itself "99% Power." He will be in Charlotte tomorrow.
Lerner wasn't the only one kept at the gates. Marguerite Young, western states director for capital stewardship at SEIU, says she arrived at around 9:30 in the morning for the 1 p.m. Wells Fargo meeting. She was told to go to an alley entrance and she stood in line there. The processing of individuals moved slowly. At around 10:30, officials allowed people waiting behind her to cut in front of the line. They were flashing badges -- as opposed to stock ownership credentials -- suggesting that these individuals were employees. At a little after noon, she says she was the next person in line to enter when she was told the room was full and that she could not go in.
When I spoke with Young yesterday, she was at the post office mailing letters to the state of Delaware and the SEC related to the exclusion of Wells Fargo shareholders from the annual meeting. The letters, Young says, call for a thorough investigation to determine if Delaware state law or bylaws had been broken. One remedy in such an instance would be to redo the annual meeting, she says.
When I asked about space issues at the meeting, a spokesperson for Wells Fargo told me that "that didn't come from the bank." The room had a 270-person capacity and there were more than 200 people in the room, the spokesperson said. "Because of protests, San Francisco police blocked some of shareholders from coming," he said, expressing disappointment that not all shareholders could attend. The spokesperson did not know the employee-to-shareholder ratio at the annual meeting.
Young says other shareholders were let in through different entrances. CalSTRS investment officer Phil Larrieu was one such shareholder, but it certainly wasn't a cakewalk. Larrieu was there to present a proposal for the New York City pension funds on an internal controls report related to mortgage servicing, he says. Prior to his arrival, he had exchanged emails with Mary E. Schaffner, Wells Fargo's senior company counsel and assistant corporate secretary, and Schaffner was anxious that he get in, he says.
When Larrieu arrived at the meeting's location, he went to the front of the building. Police were blocking the way. He dropped Schaffner's name and said he was there to present, to no avail. He then went to the side entrance, and again the police would not let him in. Finally, he went to the back entrance, where there were two lines of police, he says. After much discussion, he got through the first police line. At the second line, after another discussion, a private security officer intervened. The officer took his business card to Schaffner. After she gave the okay, he was finally let in.
Pushback at Peabody
At Peabody Energy, the situation was slightly different but led to a similar outcome. Arif Haque, an attorney at the law firm Border Crossing was at the event. Shareholders began to arrive at around 8:30 a.m., he says. Observing from a distance, he saw there was more than one entrance line. Once a person's paperwork was processed in the first line, they were sent to a second line. The lines were slow and a Peabody official was mistakenly rejecting candidates claiming they all owned the same shares, he says. Haque stood in the first line with some of the shareholders who had been bumped. After persuading a Peabody official that their paperwork was in order, those shareholders went to the second line, but given all the delays, they never got to attend the meeting, he says.
Concerned that there was no reason the lines should be taking as long as they did, Haque says he approached police officers, telling them he needed to speak with a Peabody lawyer. At around 9:45 a.m., a corporate compliance officer came outside. Haque says he explained that a person with one share has as much a right as one with 40 shares to attend and that you can't profile people attending a shareholder meeting as to who will ask questions and who won't.
The compliance officer told Haque he could see him in Delaware court, Haque says. But the St. Louis courts were a couple of blocks away, so Haque handed some paperwork to a Peabody representative and headed there. He obtained a preliminary order from a judge ordering that nine shareholders be admitted. By the time he was back from court, however, the Peabody meeting was over.
Peabody Energy sent an email statement from Vic Svec, senior vice president of investor relations, saying that "the doors were closed at 10:00 am at the start of the meeting…. Prior to that time, we admitted individuals possessing proper credentials of share ownership…. It is unfortunate if the acts of protesters stalled the process."
The SEIU's Lerner says what happened at Wells Fargo is unlike anything he has ever experienced before. He attended the 2009 Bank of America meeting, when shareholders decided to strip then-CEO Ken Lewis of the chair title. There were no problems at that meeting regarding shareholder admission, he says.
All eyes will be on Bank of America CEO Brian Moynihan tomorrow. How he handles this meeting, with forewarning that monitors will be present, will be a test of his leadership. Not responding to the coalition of investors, however, may not have been his best first move.
Eleanor Bloxham is CEO of The Value Alliance and Corporate Governance Alliance (http://thevaluealliance.com), a board advisory firm.