Every year at the end of April, the business world turns its eyes toward Omaha, Nebraska, the home of Berkshire-Hathaway, and its annual meeting. It's quite a show, with Warren Buffett and Charlie Munger giving their opinions on everything from recent political events to the advantages of drinking Coca-Cola.
Upwards of 20,000 people come to Omaha for this event. If you would like to attend, all it takes is one share of stock to participate.
Unfortunately, the typical annual meeting of a corporation isn't quite as exciting as this. But an annual meeting is required for nearly every corporation, so you will need to know what goes on.
What Is an Annual Meeting?
The annual meeting of a corporation is a gathering of shareholders of the corporation. An annual meeting may also be called a general meeting, an annual shareholder meeting, or an annual stockholder meeting.
Every corporation is required to hold an annual meeting; usually, the meeting is held just after the end of the company's fiscal year, at a time and place designated in the bylaws.
The annual meeting usually includes the following activities:
- Election of directors whose terms are up for renewal or to fill vacancies on the board of directors
- Declaration of a dividend or changes in the dividend policy
- Review of the corporation's annual report
- Discussion of new projects and activities.
Can You Vote If You Can't Attend?
Before the annual meeting, each shareholder receives a proxy statement. This document (usually mailed) describes matters to be voted on at the meeting. Typically the proxy is for voting on the board of directors members and for votes on other matters the board wants shareholder opinion on. Shareholders who cannot attend can usually vote their proxy by mail.
The Annual Report
Every corporation is required by the Securities and Exchange Commission (SEC) to have an annual report and/or a more complex, detailed document called a 10-K, for shareholders. The annual report includes information on the company and its current financial position.
Most corporate annual reports include:
- A statement by the Chairman or CEO about the state of the business (kind of like the State of the Union address)
- A narrative review of the past year, with new products, new research, happenings, and other current information for shareholders
- A discussion of changes in financial policies, dividends changes, and other matters of concern to shareholders
- Financial statements, including a balance sheet, income statement, and sources and uses of funds statements.
- For publicly traded companies, an auditor's report must also be included. The auditor certifies that the financial statements were compiled using generally accepted accounting principles.
Electing Board Members
When a corporation is formed, typically there may be only a few members of the board of directors, with the founder being one of them. As a corporation grows, more board members are added.
When a corporation starts having shareholders, the shareholders elect the board members—one share, one vote. (This is where the proxy statement comes in.) Usually, a nominating committee prepares a slate of possible board members, who are voted on at the annual meeting.
Board members usually are elected for a term of several years, with staggered terms, so some board members are coming off the board each year and need to be replaced. This keeps the board from being filled with just new members or with members who "retire in place."