Why You Should Not Miss Shareholders' Meetings

The following commentary is from an investment professional with Clear Harbor Asset Management who is a participant in TheStreet's expert contributor program.

NEW YORK (TheStreet) -- We're in the middle of corporate America's proxy season, a time when the top executives of the world's largest companies -- and their boards of directors-- are expected to appear in front of shareholders at annual meetings and take questions. Sometimes, heaven forbid, they even take criticism.

These events are often ignored by investors and the media, unless there's some high-profile proxy vote or showdown taking place. That's a shame, because annual shareholders' meetings are a rare and important opportunity for shareholders to size up the companies they own and the executives that are running them.

More importantly, these meetings give shareholders a venue for trying to hold a company's board of directors accountable for their performance representing the interests of shareholders. In addition to being an opportunity to ask questions of top executives and give feedback, annual meetings are place where shareholders can vote -- either in person or by proxy -- for or against directors and on other matters.

Sometimes, the outcomes of these votes are uncertain and can have major consequences for companies and their shareholders. Usually, they're just a formality, but either way, the tone of an annual meeting can offer telltale clues about a company's commitment to serving the interests of its shareholders -- a crucially important gauge for the long-term investor.

Companies that are well-run and have good corporate governance will often have freewheeling annual meetings where many shareholders ask tough questions and offer constructive feedback. Their executives and directors will respond with thoughtful, enlightening commentaries that include frank assessments of the risks the company faces and the challenges it is trying to overcome.

On the other hand, companies that are poorly run, have bad corporate governance or are not truly confident in their future prospects will often run their meetings with an iron fist, ignoring key issues, bristling at tough questions and stifling dissent. Often, shareholders will raise important underlying issues about a company's governance -- like executive compensation or capital allocation practices -- and the response of the company to such scrutiny can speak volumes about its quality.

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