Business Day

IT'S annual shareholder meeting season again: that Groundhog Day moment when executives emerge from their rarefied world of corner offices, corporate jets and staffs of yes-men, to meet the company's owners and field their questions. For all their shortcomings, these annual meetings are the only time when democracy begins to enter into the investor experience today.

But even that may be too much for Weyerhaeuser, the giant forest products company based in Federal Way, Wash. At its annual meeting last Thursday, the company's board and management broke with their longstanding tradition of taking shareholder questions from an open microphone on the floor. Instead, they required that shareholder questions be submitted in writing, either before or during the meeting. And Steven R. Rogel, the company's chief executive, announced that his directors and managers would devote just 15 minutes to answering the written questions.

It's a disturbing precedent to abolish the single spontaneous interaction that executives - who, after all, are hired help - have with their owners every year. But Weyerhaeuser went even further, according to an investment manager who attended the meeting, by gaveling down several shareholders who tried to ask questions from the floor. And when management cut short the answer period and a proxy holder stood up to make a point of order and ask why, a beefy security guard removed him from the meeting.

"It was a show of force that shareholders should be seen and not heard," said Bruce T. Herbert, president of Newground Social Investment in Seattle, the man who was escorted from the room. "I have never been to an annual meeting that didn't have Q.& A."

To be sure, companies are not required by law to answer shareholders' questions from the floor at annual meetings. And it is certainly understandable that companies want to rein in gadflies and disruptive questioners whose agendas do not match those of most shareholders.

Still, controlling the give-and-take between shareholders and executives that occurs just once a year and lasts for only a few minutes does seem rather Kremlinesque.

Frank Mendizabal, a spokesman for Weyerhaeuser, said: "What we were trying to do was ensure the meeting was orderly and that as many questions as possible were answered. It's a business meeting, not a forum for special interest groups."

He said the company answered 12 of about 30 questions that were submitted and that it planned to communicate its responses to the remaining queries, though he said he did not know how it would do this. He added that Weyerhaeuser had not decided whether it would stick to the written-question format at next year's meeting, but that more questions were answered this year than in previous years when they came from the floor.

One question that Mr. Herbert hoped to ask of Weyerhaeuser management was how it planned to respond to the decision last Wednesday by Calpers, the big California public pension fund, to put the company on its focus list of corporate laggards. Calpers said it included Weyerhaeuser on its list primarily because it has a so-called classified board, meaning that its directors are elected in different years. That structure makes it easier for the company to combat a takeover and makes directors that much more entrenched. A majority of Weyerhaeuser shareholders voted to declassify the company's board in 2000, 2002 and 2003, and again this year - to no avail.

Weyerhaeuser prefers a classified board, Mr. Mendizabal said, because "we have to plan effectively over a long term and a staggered board assures that directors will have long-term experience and understand our business."

"We were certainly surprised and disappointed that Calpers took that action," he added. "We pride ourselves on our ethics and corporate governance."

The Weyerhaeuser meeting was well attended, Mr. Herbert said. He estimated that more than 500 people were in the audience at company headquarters, and he said that there was considerable tension in the room.

While it is surely no fun for executives to submit to questions about their performance, their pay or their companies' practices at annual meetings, it should be considered part of the job. Shutting off the microphone allows them to close their ears to shareholder concerns and helps keep them comfortably insulated from the real world.

And because there are typically time limits for each shareholder question at an annual meeting, the events usually end quickly. Weyerhaeuser, for example, limited questioners to three minutes in past years. The pain for executives, if there is any, doesn't last too long.

IT'S the only time, once a year, when you can actually ask the C.E.O. or a member of the board of directors a question," said Adam M. Kanzer, general counsel and director of shareholder advocacy at Domini Social Investments. "One day a year doesn't really seem like too much to ask for."

Maybe Weyerhaeuser's executives and board should be applauded for letting investors know where they stand. Why should executives pretend, even for an hour a year, that they care about their owners' views?

Daniel J. Steininger, chairman of the Catholic Funds, a mutual fund company in Milwaukee, said the action by Weyerhaeuser looked like an attempt to gag shareholders. "This is the first time I've ever heard of anyone cutting off debate," he said. "Is there no limit to their failure to recognize who owns the company?"

Making the Weyerhaeuser move even more perplexing, Mr. Steininger said, is the trend in recent years among many corporations to argue that they should receive the same rights that United States citizens do, such as the right to free speech.

"If corporations are arguing for constitutional rights, how can they turn around and say to the shareholders who own them you have no right to speak?" he asked. "I just love the hypocrisy."

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