For the past 44 years Lewis D. Gilbert has been trying to rescue the annual meeting from the state that Grover Cleveland once called "innocuous desuetude," or harmless disuse.
Now Mr. Gilbert, who heads up an organization called "Corporate Democracy Inc.," is going into what he terms semiretirement.
For Mr. Gilbert this means he will no longer publish his own annual report, cur" rently in its 40th edition. It reviews annual meetings, annual reports, post annual reports, and the press coverage of all of the above. It also means he will go to only 75 annual meetings per year, half the number he has been attending. The chieftains of these 75 corporations can expect a continued annual grilling session by Mr. Gilbert. As the feisty shareholder recently told the American Can Company annual meeting, he intends to continue attending those meetings where "they love me the most or hate me the most."
Over the years Mr. Gilbert has been successful at eliciting both emotions. Even today, some chairmen of publicly owned companies refuse to attend their own annual meetins so they don't have to confront Mr. Gilbert. As he recalled recently at a luncheon with this correspondent, on at least one occasion he was physically threatened. Percy Johnson, former chairman of Chemical Bank, told him at an annual meeting, "I'll no take another bit of your lip. I'll smack you in the jaw."
Mr. Gilbert, however, has never been intimidated. It is his contention that the shareholders "hire management to operate the business, we don't hire it to withold information." And he has never been afraid to tell the chairmen how he thought the business should be operated.
One of his favorite stories concerns Gen. Douglas MacArthur, hwo had just been made the chairman of Remington Rand Corporation after being relieved of duty in Korea.
Recalls Mr. Gilbert, "The proxy statement went out and it showed General MacArthur did not own a share of stock. So I said, general, 'I've looked at the proxy statement and you don't own a share of stock and I think you should if you are going to be the chairman of the boar.' 'My money is my business,' the general replied, 'I'm not as fortunate [financially] as you are.' You know he lived at the Waldorf-Astoria. After all, he wasn't used to the corporal telling him what to do. I said, 'Very well. There will be a resolution, if necessary, in the next proxy statement.' Well, a year passed, and he opened the next annual meeting saying how delighted he was to see his fellow veteran and his fellow shareholder. He had bouth 800 shares."
Mr. Gilbert believes he has made a significant contribution in making the capitalistic system work. Many shareholders would agree. Comments William Morley, a lawyer in the office of the chief counsel of the Securities and Exchange Commission: "My view, and this is not speaking for the commission, is that he has made a useful contribution. He provides a voice out there for the shareholders. He certainly has been one of the first to urge a post-meeting report." A post-meeting report tells shareholders, many of whom do not attend annual meetings, what happened at that meeting.
Mr. Morley further notes that he has had some corporate secretaries say they enjoy having Mr. Gilbert at their meetings "since he livens things up. He asks tough questions, but it stimulates people and makes the meetings more interesting."
James G. Stier, director of investor relations at W. r. Grace & Co., agrees. He adds that when Mr. Gilbert introduces issues they are "intelligently presented and we discuss them. This still hasn't stopped Grace from consistently opposing most of Mr. Gilbert's resolutions."
Some of the things Mr. Gilbert believes he has accomplished include greater disclosure at the annual meeting, the introduction of post-meeting reports, the ratification of the auditors by the shareholders, and to some extent the introduction of proxy statements.
Mr. Gilbert recalls: "In the early days of the New Deal, I realized the time was right to get something for us, the shareholders, and not just for the socialists and all these other people. We needed a forum of our own. . . . This was one case where the commission did help us right back then in the '40s."
Mr. Gilbert is getting more and more support for his proposal to have every company send out a post-annual-meeting report. "You'll notice," he says "that for the first time the SEC says it favors such a report." Indeed, Mr. Morey confirms that the SEC encourages shareholder communication.
Recently, even institutional investors have been pressing for such reports. Mr. Gilbert says that recently the Madison Fund, a mutual fund, said it was voting its 150,000 shares in MCA Corporation in favor of a resolution asking the company to issue such a report. The mutual fund also sent a letter to the chairman of the company to tell him of their vote.
However, to appreciate Mr. Gilbert a shareholder must attend an annual meeing to see him in action. At one such meeting of the American Can Company Mr. Gilbert jumped to his feet quickly to ask the chairman, William May, if there had been may bylaw changes.
The reason for the question, he explains later, is that "it's the only way we discovered at Ronson that there had been an important bylaw change where the company had removed for a time the limitation of age for the directors."
He queries Mr. May about executive expense accounts and if junior officers picked up the tab for senior officers. By now, corporations have gotten used to this question, and as Mr. Stier of W. R. Grace notes, have the answers ahead to time, Thus, it's easy for Mr. May to tell Mr. Gilbert that the top 42 executives had expense accounts of $600,000 or $15,000 per person.
Actually, at this point, Mr. Gilbert even informs the companies what questions he intends to ask as long as they will be reprinted in full in the post-annual report. He calls this the "British parliamentary system." At Westminster, the prime minister, like the chief executive officer of these companies, knows the questions in advance when he appears before Parliament.
Throughout the whole meeting Mr. Gilbert is on his feet asking questions and talking nearly as much as the chairman. He wants to know how much money was pent on the company's audit and why the amount is not disclosed in the company's proxy statement. Mr. May informs Mr. Gilbert that the SEC has reviewed this type of request before. It decided that audit costs do not need to be included in the proxy statement since individuals comparing two years of audit fees might get the wrong impression and this, in turn, could jeopardize the quality of the audit. In spite of the SEC's reservations, Mr. May tells Mr. Gilbert the company will have the information in next year's statement.
Again, he explains after the meeting why he asks the question: When he was at the Rockwell International annual meeting, the company reported that instead of the $3.8 million spent on the audit the year before, the audit cost had jumped to more than $5 million, an increase beyond the inflation rate. So Mr. Gilbert asked why. He was told that the company had been involved with some mergers and acquisitions requiring some extra work by the auditors.
For the next three years, Mr. Gilbert says he will be elaborating on his annual meeting experiences by writing a book. Then, American's No. 1 shareholder will make his own disclosures for other shareholders.