Yum! shareholders' meeting hardly yummy.

At least 30 armed police officers and other plain clothes security personnel were directing motor and foot traffic. To enter the building, all visitors had to be pre-registered, sign in, and get temporary badges. Guests were herded through a metal detector where all sharp objects, weapons, cell phones, and cameras were confiscated.

A White House state visit? Hardly. It was the 2004 annual shareholders' meeting of Yum! Brands, parent company of Taco Bell, Pizza Hut, Long John Silver's, A&W, and KFC, held May 20 in Louisville, Ky. Will Thomas and I were there to represent the $1.75 million Brethren Benefit Trust pensioners and Brethren Foundation asset management clients own in Yum! stock. For three years BBT has led a shareholder resolution asking Yum! to ban smoking in its corporate-owned restaurants.

Seems like a simple request. Taco Bell took that step several years ago when it was owned by Pepsi. KFC's European division has instituted such a policy. So have McDonalds and Wendys. Moreover, such a ban would remove the threat of costly tobacco-related lawsuits by employees or patrons and reduce health risks to everyone in the restaurants. Even some Yum! officials privately support BBT's resolution and voted for it as shareholders.

Nevertheless, at heart of the issue is control, which Yum! did everything in its power to maintain. Once shareholders passed through the metal detector, aisle controllers guided visitors down the hall. At the meeting, where chairman and chief executive officer David Novak took his seat on a small stage along with corporate secretary Chris Campbell, just off stage were two big men whose job it was to watch the shareholders--Yum! bouncers. Each shareholder resolution was limited to one speaker and three minutes. No additional dialogue was allowed. Each speaker, Will Thomas included, spoke into a cordless microphone firmly grasped with two hands by a Yum! employee.

Once voting concluded, the firm had no plan to announce preliminary results. A majority of shares are voted in advance through proxy statements, and so the outcome of the vote—but not the official vote percentages—is usually known at the start of each meeting. After pleas from several shareholders, the numbers were read with BBT's resolution receiving just over seven percent of the vote. Or did it? The Securities and Exchange Commission mandates that resolutions can return year after year only if they meet increasing percentage thresholds of the vote, not including abstentions. However, Will and other resolution presenters believe that the numbers presented by Yum! included abstentions which, if true, would reflect a much lower percentage of support. The true tally will be available July 1.

Why armed guards, metal detector, aisle controllers, bouncers, and limited shareholder interaction? One reason we were given is that some shareholder activists, such as People for the Ethical Treatment of Animals (PETA), have been known to become extremely disruptive during shareholder meetings. But having witnessed all of this control, I think Yum! does not want a single shareholder resolution to pass—even those that are just and right. One successful resolution could spawn new resolutions and soon Yum! could have shareholders caring about and participating in the company they own, leading the firm to adopt sensible social practices in addition to maintaining a strong balance sheet. What a concept!

—Nevin Dulabaum is director of Communications and Information Services for Brethren Benefit Trust.

Source: 6/04/2004 Newsline
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