The tenth chapter in Business Adventures by John Brooks is all about shareholder control (read my reviews on chapters 1, 2, 3, 4, 5, 6, 7, 8, & 9).
The concept of control is one that is often overlooked by retail shareholders, in my opinion, they are right to ignore the value of control that buying shares brings them. My several hundred or even several thousand shares are virtually meaningless when it comes to exercising the control value of the shares. On a much larger scale, the type of control that Aswath Damodaran talks about in his blogs and papers is much different. It is the value in being able to fully control the company without having to purchase the whole thing.
What’s interesting though is that chapter ten is a story about John going around to a bunch of annual shareholder meetings and learning what occurs at the meetings. He finds regular shareholders like you and I attending, instiutional representatives, along with a few professional shareholders who are their representing their own shares along with the interests of many other shareholders in exchange for a fee. The types of things these almost activist shareholders bring up at the meetings are the usual sort of thing a retail investor would be looking for in the company 10-Q and proxy statements. Changes to accounting, changes to director compensation, practices for setting compensation, and so on. What’s interesting though is that the reaction by the boards at these shareholder meetings is in itself more revealing than simply reading the minutes or the results. The body language and method of reacting tells a lot about the management team’s skills when dealing with a crowd and when dealing with answers to potentially damaging questions.
Having been to a number of shareholder meetings myself, I can tell you that I agree with John’s conclusion – being in the room is way different than being on the call, or reading the filings. You can’t be at them all though so picking the one or two that you have the largest stake in and making it a point to get to know management a little deeper by participating in a meeting should be on your agenda as an investor.
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