Stockholder democracy is illusion

When Comcast CEO Brian Roberts asked for shareholders' comments at the company's annual meeting in Philadelphia recently, several attendees were ready.
One, representing communications-union workers who went along with last year's Comcast-AT & amp;T merger, said his members "feel betrayed" by Comcast's tough stance in current contract negotiations.
"If a company is successful enough to put its chief stockholder on the Forbes 400 list, it's successful enough to pay a living wage," he declared.
Another shareholder griped about Comcast's stock-option grants to executives, arguing options contributed to the recent corporate scandals around the country.
Yet another complained that two of the four members of Comcast's nominating committee for corporate directors, including Roberts, are "insiders." The company, he said, is using "legal loopholes" to skirt the intent of regulations meant to assure that nominating-committee members are free to pick candidates who will aggressively oversee management.
"How can shareholders be confident directors are truly independent if they are handpicked by the CEO?" he asked.
The results
Sound to you like an annual meeting spinning out of control? Then let me guess -- you haven't been to too many annual meetings.
In fact, Roberts parried the questions politely, then called for a vote on a string of issues put to shareholders. Management's proposals on executive pay and all other issues passed, just as everyone knew they would.
Indeed, during the 100-minute meeting, there appeared to be only one decision that was not a foregone conclusion. When a shareholder complained that the directions to the meeting at the First Union Center did not consider the needs of subway riders, Roberts made a quick executive decision. "We will make that correction in the future," he declared.
There was nothing unusual in the Comcast meeting -- at almost all annual meetings, management gets everything it wants.
If so, why have them?
Obviously, the annual meetings required of public companies have their roots in the days when communications were poor and most shareholders were local. Today, shareholders don't need to meet to find out what's going on with their company. Corporate reports, news stories and analysts' research can be accessed instantly on the Internet, much of it for free.
Even if you want to attend the annual meeting, you don't have to do it in person. I followed the Comcast meeting from the comfort of my desk miles away, listening via Webcast.
Annual meetings do provide a rare opportunity for shareholders to question executives and directors face to face. But not many shareholders feel it's worth the trouble; the vast majority don't bother to attend -- though they often vote by mail, phone or Internet.
Ideal vs. reality
Publicly held corporations are supposed to be democracies. They are owned by the shareholders, who elect directors to hire and fire managers. The annual meeting has all the trappings of democracy -- reports to shareholders, discussion, voting.
But the democracy is just an illusion. Typically, the director candidates run unchallenged, because only the directors have the power to decide who gets on the ballot. In the case of some companies, such as Comcast, real control remains in the hands of the founders and other insiders who control special classes of stock with supervoting powers.
In the Internet era, it may no longer be necessary to hold annual meetings to conduct important company business. But that doesn't mean corporate democracy is unnecessary as well. Look back at all the corporate scandals of the past couple of years, and you'll find a common denominator: a handful of insiders who felt they didn't have to answer to their shareholders.
XJeff Brown is a business columnist for The Philadelphia Inquirer. E-mail him at brownj@phillynews.com.