If you buy
stocks on your own but arenít confident you are
proficient enough with financial data to spot threats to
your investments, hereís one easy test that even a
novice can master: Watch if a company you own schedules
its annual meeting far from its headquarters.
practice often means a company is hiding from its
investors by picking a location too far away for critics
to show up and vote or ask tough questions at the
meeting. This simple test can signal to shareholders
when trouble is brewing behind the scenes, according to
a study done by finance professors David Yermack, of New
York University, and Yuanzhi Li, of Temple University.
found that companies that leave their home turf and
schedule annual meetings more than 150 miles away often
end up reporting disappointing profits within six
because disappointing earnings, other unexpected bad
news or internal strife canít be hidden indefinitely
and can lead to losses for investors, the researchers
suggest shareholders pay attention. Itís an early
warning device that can help investors look deeper into
the possibility of losses in their investments.
that held meetings 1,000 miles from their headquarters
ended up, on average, with shares underperforming the
stock market by 16.5 percent over the next 126 trading
days or six months, the researchers said.
the meeting was 50 miles from a headquarters and more
than 50 miles from a major airport, the performance was
about 22.7 percent below the stock market average in the
next six months.
meetings far from airports can keep savvy investors, as
well as hecklers, from making the trip. It can also
control who shows up to vote on decisions like who will
be on the board of directors.
executives typically like to have a board that will be
on their side.
are required by federal and often state regulations to
hold annual meetings, where executives update
shareholders on how their investment is doing. And itís
common practice at each of those meetings to have a
question-and-answer period, when anyone who owns a share
of stock in the company can go to the microphone and ask
gadflies go from meeting to meeting to challenge
companies on issues such as environmental policies and
there can be tough questions on behind-the-scenes issues
that will bubble up soon in company operations and be
reflected later in the quarterly earnings report.
media also attend meetings, and questions can embarrass
example, the 2013 McDonaldís Corp. annual meeting
received widespread media coverage after Hannah
Robertson, then 9, took the microphone and told company
Chief Executive Don Thompson, "It would be nice if
you stopped trying to trick kids into wanting to eat
your food all the time."
CEOís response, that ĎWe donít sell junk food,í
was ridiculed by commentators," the researchers
said in their study, published by the National Bureau of
sometimes try to avoid embarrassment by limiting
questions to a short period.
researchers said that in 2013, Wal-Mart allowed only 15
minutes of questions in a four-hour annual meeting when
it "also obtained a temporary restraining order
against labor unions and others in an attempt to
pre-empt picketing at the meeting site. Bank of America
at its 2012 annual meeting displayed a running timer on
a video screen to limit each questioner to two minutes,
after which a chime sounded and the microphone went
moving to distant locations isnít just about keeping
find that managers schedule long-distance meetings when
the firm is experiencing adverse operating performance
that is not already known to the market," the
analyzed 10,000 annual meetings scheduled from 2006 to
2010, watching for those who scheduled their meetings at
inconvenient times and locations for shareholders.
began their research after talking with a European
activist shareholder who claimed that he could forecast
poor performance in a company when executives
"behave evasively during their shareholder
became suspicious when managers answered questions
incompletely, cut short chances for shareholders to
speak, refused to recognize certain speakers or excluded
controversial items from the agenda.