Preparing for Querulous Questions at This Year's Annual Meeting

Whether the source is a combative trade union, strident special interest group or disgruntled shareholder, it is increasingly common for executives to face some form of public pillorying at annual meetings.

While one can argue whether such displays of displeasure are healthy signs of corporate democracy or meaningless sideshows, there is no doubt that disruptive audience behaviour based on nasty questioning – especially in the presence of the news media – has the power to tarnish the corporate reputation. This is particularly the case when corporate executives lose their composure and lose face by failing to put forward a cogent counterargument.

With this year’s annual meeting season quickly approaching and the market/economic environment providing much fodder for attendees, IR focus weighs in on what to expect and how to prepare for querulous questioners.

Step One: Prepare a Compendium of Questions

Anticipating questions that will come from the various constituencies in attendance is an important first step in effective meeting preparation. Each company faces different issues, so it takes imagination to develop a list of company specific/relevant questions.

The key task is to make sure that the list compiled takes into account subject matters of concern to each constituent group. Expect that questions from retail shareholders could involve, for example, the share price, the dividend, the dividend payout ratio and management compensation. Institutional equity holders and debtholders may add questions about corporate strategy and effectiveness, debt repayment plans, free cash projections, ROI, risk and governance. Trade unions may demand discussions on management/labour relations, labour disruptions, recent firings/hirings, hiring plans and items of an ‘ethical’ nature such as outsourcing/offshoring and sales to or operations in countries with dubious human rights records. Environmentalists will probably want to talk about carbon footprint, carbon pricing, recent environmental spills, environmental disclosure and remediation plans. Customers can be active enquirers on topics such as product quality, product recalls, pricing and terms. Thinking like a customer, union member, environmentalist, shareholder or debtholder will allow the IRO to develop relevant questions.

Best practice is to write the toughest questions possible, five for each area of potential controversy, with headings assigned to each section. Share the questions with others in the company including public relations, public affairs and HR professionals to ensure the list is complete. Additionally, make sure to parse the annual meeting script and Management Information Circular (MIC) in the search for question topics. Nothing is worse than when a CEO makes a claim in a speech and is unable to back it up in a question period. (Generally, to avoid looking tone deaf, prepared remarks should at least acknowledge current challenges and at best head off nasty questions before they are posed).

Another good source of inspiration is the proxy voting policy updates provided by proxy solicitation firms. Taking note of questions asked at peer company meetings can also help. Some of the questions heard at recent annual meetings included:

With the downturn in mining/energy, how safe is the dividend/how safe is my job?
Will the company even be around next year given its cash burn and when can you stem the bleeding?
I purchased your preferred shares two years ago and they are now worth half of what I paid. What does that say about the quality and prospects of your company?
How is it possible for one of your directors to serve effectively on your Board and six others, including a charity; isn’t that the epitome of overboarding?
How many jobs have you offshored over the past five years?
Has the company assessed its vulnerability to a security breach (has one occurred in the past 12 months)?
Would you be willing to disclose the ratio of CEO compensation to the median total compensation paid to all other employees?
What is the process the Board uses to change the names of the comparables for compensation comparisons?
Your executive compensation is excessive compared to your comps. Why has the Board authorized this and do you have any intention of bringing it in line?
Explain in simple terms how you link executive compensation to corporate performance.
Why haven’t you adopted say-on-pay?
What is the company’s strategy for maximizing shareholder value over the coming years in anticipation of global tax law changes?
Why are there no women on the Board?
Do you have a plan to achieve gender parity?
How would the Trans-Pacific trade deal affect your competitiveness?

As the list illustrates, questions can challenge from multiple directions and even CEOs who are quick of mind and sharp of wit may have trouble coping without preparing.

Step Two: Write Answers

A list of possible audience questions should be given to executive management and the Chair in advance. It is even more helpful to prepare answers to the questions. In doing so, remember to keep the answers as short as possible because long answers are a) difficult for the speaker to remember, b) can open up other unwanted lines of questioning, c) test the patience of the audience, and d) make the speaker look unfocused.

Be careful about mentioning future plans in answers. Avoid inadvertently leaking undisclosed information about intentions or setting high expectations.

There is a school of thought that posits a question asked should never get in the way of an answer given. While a question at an annual meeting is not like one asked by a judge during a court proceeding, and executives can exercise free will in deciding whether and how to respond, it is desirable to avoid looking evasive. The answer ‘no comment’ is also not an option for the CEO or Chair.

Beyond being honest, and including facts where possible, it’s always advisable to look for positive thoughts to include in answers. Bridging describes this approach and it means building a bridge from a negative to a positive or a key message. Also, good answers do not begin with repetition of inflammatory language found in the question.

Step Three: Prepare a Binder with a Q&A Venn Diagram

Well in advance of the meeting, each company spokesperson should be given a binder containing prepared remarks, the annual report and MIC and a Q&A tab. Page one of the tab should be a Q&A Venn diagram. One circle represents the topics the Chair will address; the other circle represents topics the CEO/CFO will address, with overlapping topics in the middle, such as those related to share price performance.

The diagram should make clear to each speaker which questions he or she is responsible for answering. Sticking to the preassigned division of labour ensures responses are crisp, and there is no (public) debate on who will answer.

Following the Venn diagram page should be the Q&A documents developed by the IRO.

Step Four: Put Your Spokespeople in Training

Preparing the right answers is only part of the task; spokespeople must be able to deliver the responses successfully, adopt body language strategies appropriate to the circumstances and remain composed.

Aside from memorizing the content of answers (reading answers from a script is not recommended), spokespeople should master their paraverbal skills so that they use the right pacing, tone and pitch. Generally, speakers should employ a confident tone of voice, which includes a slightly slower speaking pace.

Posture is equally important. Speakers should stand straight, maintain a neutral head stance during questioning (not nodding to acknowledge a question, which could be perceived as a sign of agreeing with the question’s premise) and, once finished answering, look away from the questioner to encourage others to come forward.

It’s also valuable in advance of a meeting to seek allies in the audience so that they can break the rhythm/momentum of disgruntled audience members by asking more neutral questions. Also, before Q&A starts have the moderator (usually the Chair) declare a two question limit per turn at the microphone – and enforce the limit.

Most of all, remind speakers that showing frustration or outright disdain for a questioner simply invites the general audience and media observers to believe that there is some truth to the arguments put forward.

When the audience is hostile, annual meetings can be difficult but by preparing in advance, your company can make the best of a bad situation.

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