What is an Annual General Meeting?
If you’re a shareholder of a company, it means you have the right to attend that company’s annual meeting. What is an annual general meeting? It’s a once-a-year gathering of shareholders, where the company presents its annual report. Consider it a sneak peek behind the curtain of everyday operations—a look at what the company is doing to achieve its goal of returning value to shareholders.
For some companies, the annual general meeting is a big deal. For others, it’s a small event that virtually no one attends. Regardless, companies need to host a general annual meeting to discuss the many factors affecting shareholders. If you’re a shareholder, it’s your right (and privilege) to attend in some capacity.
What to Expect at an Annual Meeting
While every company’s annual meeting is different, there are a few mainstays that are consistent across all of them. These are itinerary items that are either mandated by the SEC or pertinent to the company’s duty to shareholders. Here’s what to expect.
The Annual Report
The annual report is the cornerstone of a general annual meeting. It often includes several items required by law, such as:
- Previous meeting minutes. Prior-year annual meeting are presented and approved.
- Financial statements. The company presents financial statements to shareholders.
- Ratifications for actions. Shareholders ratify or vote down directorial decisions.
- Board elections. Shareholders elect board members for the upcoming year.
Most companies provide a much more in their annual report, such as mission and vision statements, as well as prior year news. Board members and executives also use this opportunity to announce initiatives, campaigns, products and other important information pertinent to shareholders.
Annual general meetings are the time when special votes take place, such as the vote to fund a dividend. Other special voting circumstances may include a merger or acquisition, or a proposal regarding the company’s governance. For voting shareholders not able to attend the annual meeting, companies issue Form DEF 14A. This form provides shareholders with information, which they can then use to vote by proxy through their broker or in another way.
Question and Answer
Many companies open the floor up to shareholders for a period, to field questions. This allows shareholders to interact with executives and ask questions that may not appear in the annual report. This is an optional process that many companies forgo if there’s any risk of activist investors or negative sentiment from shareholders.
Larger companies who see more of a shareholder turnout tend to wrap up annual meetings with forward-looking statements. These offer investors insight into the direction of the company and its goals over the coming year. This is also common for companies with new leadership or those heading into potentially rough fiscal years ahead, as a way to calm investor worry.
Famous Examples of Annual Meetings
There’s no better example of what an annual general meeting has the potential to become than the annual Berkshire Hathaway (NYSE: BRK.B) annual meeting. While the annual report and other mandated portions of the meeting take roughly 30-90 minutes, the meeting itself stretches on for up to six hours! This is because legendary investor Warren Buffett and his vice chairman Charlie Munger choose to answer shareholder questions for several hours prior to voting and elections.
The Berkshire Hathaway annual meeting is often called “Woodstock for Capitalists” and Buffett himself is the “Oracle of Omaha.” Together, they represent a more sensationalized approach to annual meetings. The meeting itself is often live streamed by various news outlets.
Other examples of famous annual meetings show how rough they can be for companies facing scrutiny. In 2013, Wal-Mart’s (NYSE: WMT) annual shareholder meeting was protested by workers and officially drew the ire of shareholders as the company faced major backlash from several worker exploitation scandals. Unsurprisingly, the meeting did not feature a Q&A session with executives.
For the most part, annual meetings go one of two ways. In positive situations, companies use them as a way to leverage good news into brand building. In negative situations, executives work to minimize negativity, keeping meetings short and to-the-point on a positive note.
Do You Need to Attend an Annual Meeting?
Thanks to digital technology, most investors don’t need to attend annual meetings in-person. Voting happens via proxy and information is accessible through investor portals and on company websites. During the 2020 pandemic, many companies also switched to video streaming formats, which allows more people to tune-in remotely to view the meeting or watch it pre-recorded.
Why attend an annual meeting? For the experience. Many Fortune 100 companies use annual meetings as a way to thank their shareholders. Companies like Starbucks (NASDAQ: SBUX), Cabela’s (NYSE: CAB) and Electronic Arts (NASDAQ: EA) shower attendees with gifts and swag, and even sneak peeks at upcoming products.
Beyond the swag, there’s one other reason to attend an annual meeting: to exercise your right as a shareholder. Attending an annual general meeting gives you the chance to see how it works, to cast your vote in person and to listen to executives (or even ask questions). There’s an authentic experience that comes with attending a shareholder’s meeting.
Stay Apprised of Upcoming Meetings
If your portfolio includes individual companies, pay mind to when each has its annual meeting. There may be some you choose to attend in-person; others you might want to stream. It’s important to know your voting rights, and to understand how the company did the previous year and what its prospects are for the year ahead.
What is an annual general meeting? It’s a chance for you, a shareholder, to be an active participant in the company you have a vested interest in. Take advantage of it!