Halliburton Company is catching heat from shareholder activists for holding its meeting in Duncan, Oklahoma, a town of 22,500, instead of Houston as it has done since 2003 (AP article).
“They’re relocating to a city where they don’t actually have to be accountable to their own shareholders,” said Maureen Haver, spokeswoman for the Houston Global Awareness Collective and one of 15 protesters arrested at Halliburton’s meeting last year. “They’re going to a town they have in their pocket.”
Halliburton asserts it is holding its meeting in Duncan “because we are a company that values our tradition and spirit of innovation — much of which started in Duncan more than 80 years ago.â€? Halliburton currently has manufacturing, technology, and administrative facilities in Duncan which employ 2,400 people. Halliburton announced the location in its proxy materials filed last month, so it is not a last minute change. Additionally, it is common for larger public corporations to hold their meetings in different locations each year. “[D]oing so gives shareholders in different regions of the country the chance to show up and executives the chance to showcase local facilities.â€?
Delaware (Halliburton’s state of incorporation) allows a board to designate any location of its choosing for the annual meeting, absent a certificate or bylaw provision to the contrary. In fact, since 2000 Delaware has allowed corporations to hold virtual shareholders’ meetings, i.e., meetings held in cyberspace instead of a physical location.
Only 100 shareholders attended Halliburton’s meeting last year. However, a number of people were arrested in connection with a sit-in protest. It seems more likely that Halliburton has moved the meeting to Duncan to avoid protests surrounding its controversial war and other activities. However, it may not work.
A group that accuses Halliburton of war profiteering, Oklahoma Veterans for Peace, received a permit for 300 demonstrators outside the meeting at the Simmons Center, a venue Halliburton helped fund. The group’s organizers expect to be joined by anti-globalization activists and other protest groups, including Houston Global Awareness.
I don’t see how exactly the location of a meeting that only a 100 shareholders attended the previous year implicates “accountability to shareholders.� Nor do I see the relevance to the issue of the meeting being held in a company town. If shareholders are really concerned about the location of the meeting, one of them should propose an appropriate bylaw amendment pursuant to Rule 14a-8 to remove discretion on the matter from the board.
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If you look at some the pieces written when Delaware and other states were adopting laws to allow for the e-only meetings, they talk about the purpose of annual meetings. I wrote these FAQs about e-meetings long ago:
http://www.realcorporatelawyer.com/faqs/faqmeetings.html. Probably the most telling item along these lines were the letters that CII sent to CEOs of large companies when Delaware passed their law, basically threatening companies if they tried to do an e-meeting. That’s probably why only two very small companiess have ever tried an e-only meeting even though these laws have been on the books 5 years or more.
As for Halliburton, I think the location speaks for itself – although it purely is conjecture. But there are plenty of clear instances of companies
picking hard-to-reach locations – such maneuvering by some of the governance poster-children companies is not much of a big secret (although companies now are less prone to publicly admit it in these days of governance reform).
And here is a blog on the topic I did a while back: http://www.thecorporatecounsel.net/blog/archive/000113.html
Thanks, Broc
Your points 1 and 2 are well taken. As for your third point, how do you know Halliburton’s meeting location was selected because management is scared to face shareholders (as you seem to imply)? If that were the case, they could have picked a more remote or inconvenient location. The reference to a bylaw amendment was not meant to suggest micromanagement by the shareholders but was made in light of the fact that this is an area that Delaware law specifically contemplates being addressed in the bylaws. Also, I’m curious as to the basis of your statement that “the purpose of the meeting is to allow shareholders the opportunity – just once a year – . . . to confront management if they so choose.â€? I’m actually working on a law review article that explores the justifications for the annual meeting requirement, so have researched it. I’ve seen “confrontationâ€? mentioned in one article by an Australian law prof. relating to virtual meetings, but confrontation is not mentioned in the MBCA, the Delaware Code, the single case I’ve located that addresses the issue, or any of the exchanges’ materials. Did I miss something?
A few thoughts:
1. 100 shareholders can be a lot if it contains a significant number of your largest holders.
2. The level of attendance at a prior meeting doesn’t necessarily mean attendance will be the same at a subsequent meeting because issues might arise at a company over the course of a year that will draw larger numbers of shareholders to attend.
3. Why should shareholders be required to propose a bylaw amendment for something as simple as the location of an annual meeting? Are we living in an age where shareholders must propose bylaw amendments for the hundreds of actions that comprise sound corporate governance. What company wants that type of micromanagement (and what type of shareholders have the resources to undertake that effort). If management is scared to face shareholders – doesn’t that say an awful lot about the “tone at the top”?
The bottom line is why bother even holding an annual meeting if your logic is followed. The purpose of the meeting is to allow shareholders the opportunity – just once a year – for shareholders to confront management if they so choose.
Broc Romanek
Editor, TheCorporateCounsel.net