The speaker from the floor at the Mead Corp. annual meeting last week wasn't the usual professional activist. He was a former officer and director of the corporation, and he was angry.
Arthur Harris had come all the way from Paris to tell the present board of directors what he thought of them.After he did, then they were angry, too.
Doing his best not to appear the archtypical corporate annual meeting gadfly, the 67-year-old Harris first read a prepared statement that detailed his dissatisfaction with Mead Corp. performance.
He had done his homework. Reading from a chart showing financial figures of 12 leading paper comapnies, he methodically showed that Mead was paying out the smallest percentage of earning to the stockholders (27 percent) of the 12.
He also determined that, over the past couple of years, Mead officers and directors had been paid an average of $4.5 million a year in various forms of remunerations, a figure he said was about 21 percent of the amount paid for dividends to all stockholders.
To make matters worse, stock option plans available to officers in 1978 could increase that percentage to about one-fourth of the dividend payout, he said.
Harris has his reasons for being angry about the dividend payout because he is a major stockholder. He joined Mead as a division president and director when it bought his family owned Atlanta Paper Co. in 1955, and still has a considerable financial stake in common stock.
He wrote Mead's president, Warren Batts, in January. He wrote again in March. He wanted answers to the questions raised by his analysis of Mead's performance compared to the other paper firms. But he got no reply.
So he went to Dayton last week, and took his questions to the floorof the annual meeting - joining the growing number of individual shareholders actively fighting for a louder voice in corporate affairs.
He had crossed the line, and gone to the other side. He joined the outsiders.
"I was angry," he said in an interview a few days after the meeting. "They hadn't given me the courtesy of an answer to my letters.
"I wanted to know what their policy was on dividends and on corporate remuneration. Executive compensation, including gains from stock options, averaged well over 20 percent of common dividends. That appeared high. As a stockholder, I felt they were fair and legitimate questions.
"As long as Mead, which price-wise has trailed the industry for years, fails to pay generous dividends, investors and analysts will continue to undervalue the stock."
But the details of his case are not the important factor of Harris' appearance and statement at the Mead meeting.
His action adds more fuel to the beginning of a new era of stockholder activity and attempts by federal securities regulators to give the stockholder a new voice.
"Most stock is held by people like bankers, who serve on the boards of the companies whose stock they hold," said Harris. "They aren't going to raise trouble, because they want the companies' business, they want those big commissions from new underwritings. And so many of the boards have interlocking relationships."
Others agree with Harris and are concerned about the interlocking nature of corporate boards in the U.S.
"Large corporations have become increasingly tied together through devices such as joint ventures, mergers, stock ownership, debt relationship, contractual arrangements and interlocking directorates," stated a recent report for a Senate committee studying the problem. The report cited many areas of potential abuse of corporate independence.
And Securities and Exchange Commission staffers are working on new rules that would give the average small stockholder more of an involvement in corporate affairs, up to and including the election of officers.
All that is fine, says Harris, but he wants to see more former, or present, insiders of major corporations lead the way to more open and independent operations. Former directors or officers can bring one valuable asset to a stockholder argument - inside information.
"It can make a great deal of difference when the man on the floor of the annual meeting, complaining about the performance of the company, was once in a director's chair himself - it's harder to dismiss his questions," says Harris.
And unlike many government agencies, or writers of congressional studies, Harris may actually do something about it. He's thinking about putting together a group of former or present directors and officers, who may be retired and looking for something to do. They would form a strike force that can hit annual meetings with a certain degree of force and expertise that will make it harder and harder for companies to keep decision-making limited to the few people at the top.
They would confront corporations with tough financial questions from the stockholders' point of view and, because of their stature and insider's knowledge, would get answers that the traditional small stockholder might not get, Harris contends.
It certainly would add a dimension to annual meetings, which today too often are used merely to announce earnings or show a film on the company's new plant.