Electing Directors

The third segment of an annual meeting is to elect Directors for the coming year term. The term would be one year from the date of the Shareholders meeting. Directors are just that. They direct the company. They have skills that many Officers do not have, due to the Officers are doing the daily grind of the business. Directors are taking a birds eye view of the company, its industry, its competition, and its ability to merge with another company if the situation becomes apparent. Directors of a company can be compared to directors of movie films. They are there watching what is going on, from a third party perspective, so they are able to see the results differently than the Officers and employees.

Directors are the Captain of the ship. They are looking ahead of the front of the ship to beyond the horizon. They keep up with the industry and what is happening globally, so they can change the way the company is running, if it is not in its best interest. Officers may or may not be directors. In a non public company, they can assume the duty of both, an Officer and a Director. Unfortunately, this does not give the company leverage with its shareholders. It is more of the same mentality. It is very difficult for an Officer to be able to see past the problems at hand, and forecast and plan for the future.

You will need to appoint Directors that are not in a conflict of interest to the company. You will not be able to pick your accountant, your spouse, your lawyer. You will need to find people who can be objective when it comes to how the business should direct itself. People you work closely with, may not have the company’s best interest at heart.

Directors will direct the business during the next year, checking corporate state and federal tax returns, monthly financials, stock issuance, loans, pension or profit sharing plans, bonus’, acquisitions, or purchases. As a Shareholder you do not have control over that unless you give up your Shareholder status and request a buyout.

Resolutions

The second segment of the annual meeting is to ratify resolutions adopted by the directors during the year. I found this to be quite interesting from the Shareholders perspective. When the year is complete, the Shareholders get to find out what resolutions were adopted during the past year. The Shareholders are not voting on these resolutions during the year. If you are a director you know what they are, but if you are not, this could be a very stick situation.

Say, you are a Shareholder, and you find out at the annual meeting that a resolution was adopted by the directors during the past calendar or fiscal year, that they approved receiving a loan from a bank. This should make you upset that you are only a Shareholder. Your investment has just taken a step back in a return on your investment. The bank will now have to be paid back first, and what if the company is not making any money? What happens when they do not know how to spend money wisely, or do not use a budget?

Directors of a company, public or private have a lot of power. If they are able to get a loan from a bank, without the vote of the shareholders, then you as a shareholder are left holding the bag. If it is a public held company, then the price per share will drop, when they have more debt. If the public company can have a press release to say it is for materials for a contract they just received and the money is going to be paid back once the contract billing starts getting paid, then you at least know what the revenue outlook is like.

If you are a shareholder of a private company, then you do not have to be told what the Directors and Officers are doing at the company. You will find out at a shareholders meeting, if one is called for. An annual meeting is a requirement to continue status of a corporation. If the Directors or Officers do not have an annual meeting, the Shareholders can protest that the company is being run like a sole proprietorship and that any debt incurred should not be taken out of the Shareholders investment. The Shareholder should request that they receive the fair market value for their shares and remove themselves as a shareholder.

5 Important responsibilities to have a Successful Annual Meeting

In order to have a successful annual meeting at your company, you will need to be aware of the 5 important responsibilities that are needed. You started your company in the hopes to provide a service, product, or both and receive a profit. When you started your company you were looking forward to seeing money in your checking account, a good customer list, and easy to work with vendors. At times it didn’t seem like that was happening. Other times, it was smooth sailing. You were able to get the answers you wanted just by asking the bookkeeper, the service manager, or installation manager, or salesman. If you are the sole owner of the business, you can do it that way. If you have other shareholders, or creditors to answer to, it is not that easy.

You need to be able to answer questions about your business and how it is operating. You will need to know where you spent the money, and how much of it was spent on Cost of Goods, and Overhead. You will need to explain why the % profit is where it is. Whether it is within industry standards, or not, and why not. You will need to review all of your departments and breakdown their budgets versus actual sales and spending.

In a corporate annual meeting, there is a board of directors who were voted in by the Shareholders to oversee the running of the company. If you are a Director, then you will be presenting it to the Shareholders. If you are a Shareholder also, then you will be approving the company’s revenue and expenses for the prior fiscal or calendar year.

A Shareholders position with the company is to receive study and approve the company’s balance sheet and other financial statements submitted by the directors. Some firms provide an auditor’s report showing that they have been checked for accuracy. If you are a Director, then it is your fiduciary duty to make sure that the financial statements being presented are accurate and reflect the actual business of the company. No forward looking statements are to be included in this segment. Shareholders need to know where they stand in regards to receiving a premium on their investment. This is not the time to create fluff in accounting to provide a better looking statement. It is what it is.

As a Shareholder it is your duty to be sure you understand how the company is making its money, and if it is just on paper or do they have cash. As a Shareholder, the company may want you to invest more money in order to continue doing business. You want to be sure you understand just what is behind the numbers.

Unfortunately, for the publicly traded companies, Shareholders in them do not get to ask the tough questions and find out what how the accounting is being done to produce the financial statements they receive in their annual report. Although it may have an auditor’s report with it, there have been companies that have failed doing the very same thing.

Be sure to take this responsibility serious if you want to be a Shareholder.