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



) -- 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.

In the spring of 2009, when I was a financial journalist covering the aftermath of the global financial crisis, I sat through numerous annual meetings of companies that had recently seen their stocks plummet after years of bad performance. Their revenue and earnings were collapsing, and yet, the executives at the meetings gave little indication that anything was wrong. Moreover, there was nary a peep from shareholders, who were mostly represented there by large mutual fund companies and other such prestigious institutions.

At media giant


(VIA) - Get Report

meeting that year at its headquarters in Times Square, the company showed a slick video montage featuring its roster of famous TV and movie stars, and information about some admirable philanthropic efforts the company was involved with, but there was hardly any discussion of the financial challenges facing the company and media industry at large. At the end, one shareholder-- Roberta Crown-- asked a question:

This is all very nice, she said, but what are the shareholders getting out of it all? She noted that Viacom shares had only lost ground since the company was separated from


(CBS) - Get Report

at the end of 2005 in a bid to rejuvenate its faltering stock price, and the company was paying no dividends.

In response to this obvious and perfectly reasonable question, Viacom Chairman Sumner Redstone turned red and answered Crown in a tone that made it seem like she had just slapped him in the face. He said Viacom shareholders would be rewarded for patience, and three years later, the company is now paying a regular dividend and its stock is about 15% above where it opened after splitting from CBS more than six years ago.

I applaud shareholders like Crown who attend annual meetings and ask the right questions -- even when they're met with hostility. Redstone controls voting rights at Viacom and CBS through a dual-share structure, but I suspect that his exchange was embarrassing for other directors on Viacom's board.

Larger institutions, of course, can put pressure on corporate boards behind the scenes.

The Wall Street Journal

recently reported that

Goldman Sachs

(GS) - Get Report

agreed to appoint a "lead" director as part of a deal with the American Federation of State, County and Municipal Employees, which owns over 7,000 shares in the New York investment bank. In return, the labor union agreed not to put forth a shareholder proposal on Goldman's proxy to replace the company's chairman, Lloyd Blankfein, with an independent chairman. Blankfein currently assumes the dual role of chairman and CEO at Goldman, an arrangement that limits the ability of the board to act as an independent check on Blankfein's leadership.

The deal hardly seems like a good one for shareholders, but its existence suggests that Goldman fears an embarrassing vote at its annual meeting coming up in May after its internal culture has become the subject of public criticism. Afscme said Tuesday it was unhappy with Goldman's choice as a lead director-- James Schiro -- so we'll see how that turns out.

Next week, I'll follow up with information about new tools that are becoming available for shareholders and investors to participate in proxy voting.

Follow me on Twitter @NatWorden

Disclosures: Worden and/or his firm hold positions in GS and CBS but not the other stocks mentioned in this story.

This contributor reads:

The Oil Drum

The Baseline Scenario

I Want Media

Zero Hedge

Gregor Macdonald

Chris Martenson

On Twitter, this contributor follows:

Doug Kass of TheStreet

Jesse Eisinger of Pro Publica

Daniel Alpert of Westwood Capital

Barry Ritholtz

Joshua Rosner, managing director of Graham Fisher & Co.

Bob Lefsetz, a music industry blogger