Vote your shares.
There are many ways to protest. I prefer the ways that let me be heard directly by the people I want to influence. Whether they listen or not is another matter, but I will take the route that lets me speak directly to a person in power. If I’m going to go to the trouble to throw spaghetti at a wall to see if it sticks, I’m going to choose my wall carefully.
What follows is a recycled post from April 2008.
I told you about my plan to attend the Citi annual shareholders meeting awhile back here in New York. It was all the spectacle I hoped it would be and more. I have to say, I never, ever imagined myself attending one of these meetings. It just had never crossed my mind, and until I moved to Manhattan, most meetings would never have been within striking distance anyway.
The place was packed. The meeting was in the Grand Ballroom of the Hilton. When I got off the escalator I realized I was standing in the same room where the final scene of Michael Clayton was filmed. Kind of eerie.
My world is changed, let me tell you. This was amazing. The shareholders were angry, the executives were holding their own, but I do think I saw beads of sweat on the forehead of Sir Winfried Bischoff, the chairman. Vikram Pandit, the new CEO seemed to be trying to strike a balance between a positive outlook for the future, an apologetic stance for catastrophes that occurred before he took the wheel, and some sort of stretch for humility over the...wait, let me check the numbers...1,094,098 shares of common stock excluding options, $2,500,000 retention equity award, and the gajillion bazillion dollar rest of the package that has been reported elsewhere. The total package is in excess of $200 million.
I hate to say it, but at times he came off as rather flippant, for example when he was confronted by personal stories of long time Citi employees facing layoffs, and was asked to return some of his salary to save their jobs. "These are hard decisions," didn't quite play. He could take some lessons from Win Bischoff on appearing sympathetic while dodging the issue. That's only partly tongue in cheek, because in truth there were no answers to some of the questions in the blame game, and Bischoff did bring an air of grace to the otherwise ugly, and sometimes comical proceedings.
He also impressed me by appearing genuinely sympathetic to the corporate responsibility concerns that were put before him. I would very much like to think that having human rights and environmental issues presented by shareholders at an annual meeting can sway corporate behavior in the long term. I have no illusions about immediate action, but bringing it to the table seems like a great first step.
And bring it, they did. In a room full of angry shareholders asking for the heads of the directors on silver platters, the voices that stood out with calm, eloquence, and forceful courtesy were those of people like Amy O'Meara, speaking for Amnesty International, and Maria Gunnoe, talking about the destruction of her hometown by mountain top removal coal mining.
Being totally new to this, I had no idea that by owning a single share, you buy the right to stand face to face with the chairman and the CEO of a company like Citi and speak your mind. Indeed, that is exactly how it works.
Any shareholder can put forth a resolution, which the company responds to in print in the proxy statement. The deadline to submit a proposal for the next annual meeting is November 18, 2008. Any shareholder holding stock on the date of record, which this year was February 25th, receives a ticket to attend the meeting in person, or vote their shares by mail, telephone, or over the Internet. As I understand it, resolutions are not binding, but they can send a strong message. There are plenty of examples of shareholder resolutions that have been proposed year after year and eventually adopted.
In the meeting, someone takes the floor and presents the resolution in a prepared statement. Anyone can comment on that resolution. Everyone votes, and then there is a question and answer session. Microphones are set up in the hall, and if you have something to say, all you have to do is get in line and say it. You have the floor.
I listened to a lot of calls for change in executive compensation, stories of long time employees who are being laid off, an elderly man in retirement who has seen the income from his stock cut in half. There were stories of devastated pension plans--and of course a lot of blame being passed around over the subprime losses. The general feeling was that those loans never should have been made in the first place, and everyone should have seen it coming.
About halfway through the Q&A, I realized I had something that needed to be said. I'm not exactly a wall flower, but my knees were shaking nonetheless. Here's what I told them:
I offered a different perspective on the subprime situation. I told them that there was a moral hazard that should have been recognized across the industry, but it was missed. Most of the people who signed on for these loans were people who had been completely disenfranchised from the wealth building system, people who had been renting and never had a hope of owning their own homes. When they qualified for a loan, they were buying a lottery ticket, in hopes of being able to build a better future. In a foreclosure, the burden is in stress and in transaction costs, but in the end, they go back to renting, albeit worse off than before.
I told them that it is humane to help someone live in a house that they own, but what is not humane are the predatory lending practices that went along with these loans. Subprime may be dead, they may not be issuing any more of these loans, but there are still loans that are held, and now we are hearing about predatory foreclosure practices. I suggested that they need to act now to stop the bleeding.
But more than that, there are lessons to be learned from this. These loans were high margin instruments, that is why everyone is holding them. There was a lot of money to be made. I said that the profit was being made on the backs of the most disenfrachised part of society. What I didn't say, but what is true, is that many of these loans were made to women and single parents trying to raise a family. I told them that I support the people who spoke on issues related to human rights and the environment, and I commended them on the commitment they expressed toward those issues. I suggested that social justice and social equity can be profitable--and that when social justice is ignored, it can lead to the kind of catastrophe that we are now experiencing.
I asked them to keep these lessons in mind in the future, and to dedicate themselves to making Citi a leader as a company that holds itself to the principles that profitability is not only financial, but also reflects the principles of environmental protection and social justice.
Win Bischoff responded very graciously, and acknowledged that indeed lessons do need be learned for the future. Not all comments were responded to, and I respected him taking a moment to do so.
The angry mob in the room clamoring for profits gave me a very warm round of applause.
So, I didn’t receive a shipment of ponies and unicorns, but at least I had my say directly. I didn’t attend the 2009 meeting, because really, that seemed like one of the least safe places on the planet to be on that day.
In case you are (ahem) curious here are the current stock prices for a few randomly selected companies:
Bank of America (BAC) $6.12
Citi (C) $25.62
Goldman Sachs (GS) $94.55
Morgan Stanley (MS) $13.51
JP Morgan Chase (JPM) $30.18
And so on. You know how to do the google thing. Ironically, I checked my brokerage account this morning and found my 1.87 shares of Citi missing. It turns out there was a 1 for 10 reverse split on Citi shares on May 9th of 2011, which explains why Citi is trading at $25.62, and also explains why I am no longer holding a ticket to the shareholder’s meeting. Oh, and I was charged a $20 mandatory reorganization fee on my $8.25 share, which was kindly sold for me to offset the fee. So there’s that.