Should You Shun Companies That Reject Shareholder Input?

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Given that shareholders are part-owners of the companies they buy, you might think company management would welcome their questions and critiques. But that's not always the case. Some companies encourage comments from shareholders, while others -- including some of the biggest consumer names you know -- nearly shut them out entirely.

At one end of the spectrum is Walmart (WMT), which at its most recent annual meeting allocated roughly 15 minutes to shareholder questions and concerns during its approximately four-hour meeting.

It's not that there wasn't much to talk about, either.

During that meeting, company leadership skirted the big issues -- specifically, the risks associated with recent scandals, including Walmart's alleged violations of the Foreign Corrupt Practices Act and its failure to ensure safe working conditions in Bangladeshi supplier factories.

However, Walmart did find time for comments from Hugh Jackman and Tom Cruise, and musical performances by John Legend, Kelly Clarkson, and Jennifer Hudson.

Walmart is not the worst offender when it comes to its reluctance to allow shareholders to speak.

In this year's annual meeting, FirstEnergy (FE) allotted no time for shareholders to pose questions or concerns. In fact, its entire meeting lasted a mere 16 minutes, with CEO Anthony J. Alexander making no comments whatsoever.

The Other End of the Spectrum

In contrast to Walmart's and FirstEnergy's annual meeting agendas is Berkshire Hathaway's (BRK.A, BRK.B).

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At its annual meeting last month, Berkshire allotted six hours to questions from the audience. Even more striking, CEO Warren Buffett encouraged tough questions by inviting hedge fund manager Doug Kass, who is shorting Berkshire's stock, to weigh in with his thoughts during the meeting. Buffet also invited three financial journalists to each select the six "most interesting and important" questions shareholders submitted to them by email.

In his annual letter to shareholders, Buffett states, "Neither [Vice Chairman] Charlie [Munger] nor I will get so much as a clue about the questions to be asked. We know the journalists and analysts will come up with some tough ones, and that's the way we like it."

A More Common Approach

If Walmart, FirstEnergy, and Berkshire Hathaway represent opposite extremes in a broad spectrum of approaches to shareholder questions and concerns, then what's a more typical approach?

For the sake of comparison, let's consider some of the biggest consumer companies in the U.S.
  • Colgate-Palmolive (CL) gave shareholders around 35 minutes to address company leadership.
  • McDonald's (MCD) allotted around 30 minutes for shareholders to pose questions and voice concerns.
  • Coca-Cola (KO) dedicated around 33 minutes to shareholder comments and questions.
During these question-and-answer sessions, shareholders covered wide-ranging issues, including company innovation, growth prospects, public health, and environmental issues -- all topics that help all investors assess whether or not a company deserves a place in their portfolios.

What Does This Mean for You?

As you choose which stocks to buy, it can be useful to consider how businesses interact with their investors. If you wish to invest in companies that welcome shareholder questions and concerns, it's useful to pay attention to which ones offer shareholders and critics a meaningful forum in which to engage and challenge leadership.

After all, shareholders are part-owners of the companies in which they invest. It's not a good sign if they're shut out of the very meeting that is designed to bring everyone into the fold.

Do you prefer to invest in companies that give you a forum to question and challenge management behavior, or do you think such activities waste management's time? Chime in below!

Motley Fool Contributor M. Joy Hayes, Ph.D. (@JoyofEthics) is the Principal at ethics consulting firm Courageous Ethics. She owns shares in Berkshire Hathaway and McDonald's. The Motley Fool recommends Berkshire Hathaway, Coca-Cola and McDonald's. The Motley Fool owns shares of Berkshire Hathaway and McDonald's.

The 20 Most Valuable Brands In The World
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Should You Shun Companies That Reject Shareholder Input?

Brand Value: $27.8 billion

Percent Change v. 2012: 34%

What Happened: MasterCard's rank flew up nine spots this year to the 20th most valuable brand in the world, and Millward Brown VP Oscar Yuan attributes that ascent to "the growth of mobile technology." As consumers up their online shopping habits, brands like Mastercard and Visa reap the rewards for offering noncash payment methods.

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Percent Change v. 2012: 34%

What Happened: "They're really into the big data," Yuan explained of the German tech brand, "So [the increase in value] is reflective of a consistent storyline: The growth of mobile shopping." SAP has the big data solutions enterprise companies need.

Brand Value: $36.2 billion

Percent Change v. 2012: 5%

What Happened: Walmart, however, has mastered the art of brick and mortar shopping. "You can't buy milk online," Yuan said. The retail giant has a large and loyal consumer base that is constantly growing - even internationally.


Brand Value: $39.7

Percent Change v. 2012: -8%

What Happened: Vodafone's 8% drop in value can be attributed to O2 and Orange's recent success. But at almost $40 billion, it is still one of the largest mobile carriers in the UK.

Brand Value: $41.1 billion

Percent Change v. 2012: -1%

What Happened: While Americans might have never heard of the Industrial & Commercial Bank of China, Yuan explains that in its home country, "the logo is ubiquitous." ICBC is the first of two Chinese brands in the top 20, a number which is largely due to the countries growing middle class.

Brand Value: $42.7 billion

Percent Change v. 2012: 15%

What Happened: "I think a lot of the growth is really tied to several consumer trends - and I'm talking about the need for consumers to shop online mobile devices," Yuan told BI. Consumers need to get the products they bought on the internet somehow, and that's where UPS comes in.


Brand Value: $45.7 billion

Percent Change v. 2012: 34%

What Happened: It's almost impossible for brick and mortar shops to compete with Amazon's wide selection, low prices, and mastery of the mobile marketplace - easily allowing consumers to buy anything from anywhere on their phone or tablet. Recent acquisitions of and Goodreads also show the company's determination to dominate all aspects of mobile book consumption and sharing.

"There's no stopping amazon as they go international," Yuan said."


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Percent Change v. 2012: 20%

What Happened: After acquiring Wachovia in 2008, Wells Fargo successfully expanded from a California-based bank to a national name. Coming from California also helped Well's Fargo's image with consumers considering that it was one of the few banks to remain unscathed during the financial crisis. "It also started a major rebranding strategy expansion," Yuan said.

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Percent Change v. 2012: 8%

What Happened: Verizon got a boost after Apple opened its services to carriers other than just AT&T. While Verizon and AT&T's rivalry heats up, Yuan predicts that the competition will up both brands' game. "As data devices continues to proliferate, we will continue to see Verizon do well," he said.

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Percent Change v. 2012: 21%

What Happened: "GE ... continued to be one of the most well respected consumer and industrial brands in the world," Yuan said. And the public is starting to see that it makes more than just light bulbs. General Electric has dedicated major marketing dollars to making sure that consumers know it produces everything from airplane engines to wind turbines to medical equipment. Hammering in its dedication to innovation, a recent ad campaign even enlisted the help of famous robots.

"In terms of B2B, GE is one of the most well respected brands," Yuan continued, citing that it was often used in business school case studies.

Brand Value: $55.4 billion

Percent Change v. 2012: 18%

What Happened: China Mobile is the largest mobile carrier and brand in China, so it's a no-brainer that it's one of the most valuable brands in the world. "There are more mobile phone subscribers in China than in the U.S.," Yuan said.

Brand Value: $56 billion

Percent Change v. 2012: 46%

What Happened: A key way to bolster global presence is to sponsor the Olympics. But that's not the only thing that upped Visa's brand value so drastically. As one of the most trusted names in non-cash payments, Visa has gained clout in the world of online shopping and mobile payments.

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Percent Change v. 2012: -6%

What Happened: Marlboro is a top 10 regular, which goes to show that even though smoking is restricted in the U.S. doesn't mean that the rest of the world has laid off the habit. "Marlboro has consistently invested in the brand ever since its inception," Yuan said. "The rugged cowboy is very strong and consistent globally."

To put it another way, "about 25% of world's population are smokers, and they use it 5 to 10 times a day. I don't drink 10 bottles of water a day." That's getting your brand out there.

Brand Value: $69.8 billion

Percent Change v. 2012: -9%

What Happened: As a $70 billion brand, Microsoft is in great shape even in spite of a 9% value decrease. Microsoft is a powerhouse and has a reputation as one of the strongest tech brands in the business. But, Yuan notes, "with consumers, there's confusion as to where Microsoft fits." The company's fortune is largely tied with the PC business, but it has emerged on the mobile scene with the Surface and other devices. The company went through a major rebranding in the summer of 2012 to stay relevant.

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Percent Change v. 2012: 10%

What Happened: AT&T is another company to gain value due to the increasing U.S. consumption of mobile products. For a long time, the service provider had an exclusive deal with the iPhone, so it became synonymous with the new technology. What's really interesting, however, is that even when Apple opened the iPhone up to Samsung and T-Mobile, AT&T's value didn't go down.

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Percent Change v. 2012: 6%

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Percent Change v. 2012: -5%

What Happened: Yuan noted that one of McDonald's gifts was the ability to listen to consumers' sentiments and adapt, particularly to growing health concerns. "It has come out with a much healthier menu with apple slices, oatmeal, and a Chicken McWrap which has done well," he said.

McDonald's is also gaining a stronghold in the coffee space, which should be an interesting new endeavor to follow.

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Percent Change v. 2012: -3%

What Happened: At $112.5 billion, IBM's three percent value decrease is not a substantial figure. IBM is known as a company that consistently delivers year after year, Yuan told BI. And it is particularly hailed in the B2B sphere.

Yuan also noted that its Ogilvy-made "Smarter Planet" campaign, in which the company explained its plans to help clients innovate and make the world a better place, inspired consumers to believe in the brand.

Brand Value: $113.7 billion

Percent Change v. 2012: 5%

What Happened: Google has effectively taught consumers that it is more than just a search-based company. With maps, mail, shopping, and more, Google is integrated into everyone's lives. The company also made recent headlines about its new contribution to the hardware world in the form of Google Glass. "It will be interesting to see how Google Glass will contribute to the brand value, but now it's too soon to tell," Yuan said.

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Percent Change v. 2012: 1%

What Happened: In spite of harsh Wall Street analysis and media speculation regarding Tim Cook's leadership capabilities, Apple continues to be a strong brand in the eyes of consumers - a major value measurement for Millward Brown. "Despite what the press says and stock market says," Yuan noted, "Apple in the eyes of the consumers is the gold standard."

In the last eight years, Apple's value has increased 1,045% - only topped by Subway's meteoric 5,145% rise. (Although Subway still hasn't broken the top 20.)

Those companies are constantly innovating to stay on the top.[Those companies are constantly innovating to stay on the top.]The gay pride Oreo, from Kraft's Facebook page.

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