Angry UPS Franchisees Behind Closed Doors of Shareholder Meeting
Wightman had been vocal at last year's meeting, asking pressing questions of then-CEO Mike Eskew regarding franchisee litigation and failure rates. He wanted to know why that information was not in the annual reports or presented to the shareholders. As reported on Blue MauMau, at that meeting a group of fifty franchisees protested outside the hotel with signs and banners. But Wightman explained that it is too expensive for most operators to make the trip and take time away from their businesses. Yesterday only four franchisees made a showing. In addition to Wightman and Humbert, Glenn Sturgis, another operator from Vermont, and Richard Schaeffer from New Hampshire traveled to be there. Sturgis and Schaeffer had their proxies and were allowed into the meeting.
Sturgis gave his account saying that at the end of the meeting a spokesperson announced that everyone who wanted to cast votes did so. At that point he stood up and said that was not accurate. Sturgis told the group, "I know of two shareholders, Joe Wightman and Jim Humbert, who wanted to cast their votes, but were denied access to the meeting." Sturgis then stated he felt that should be put in the corporate record.
During the question and answer period open to the shareholders, Sturgis said he asked for an answer to a puzzling question. For the first time, this year's annual report showed the franchisee litigation against UPS and Mail Boxes Etc. He told shareholders the litigation had been going on for five years, and then asked why it was now being reported when previously it had not been in UPS's report. Chairman and CEO Scott Davis acknowledged that they knew about the litigation, that it was a class action, which hasn’t been certified. He then turned the question over to their Senior Vice President and General Counsel, Teri McClure, to give clarification. Sturgis said she gave two key reasons. First, she explained that the lawsuits have now been going on long enough to give them a chance to better evaluate them. And second, that there has been significant press coverage on the litigation recently. For those reasons they decided it should now be put in as part of the annual report.
Richard Schaeffer also asked a question, according to Sturgis. He asked about the return to the shareholders on the investment in Mail Boxes Etc. Davis' answer was that it has been a good deal, that it is a long-term investment, and they recognized the need for reversed logistics locations. Sturgis explained that was one of the reasons UPS purchased MBE, that they knew they were going to need locations for returned goods drop-off locations. He said Scott also stated that it has been a good investment for shareholders, a good investment for customers, and a good investment for the majority of UPS store owners, that most are happy. But Sturgis said, "When you put all that together it doesn't say much, as that was his answer."
He said that was about it for the meeting, that it was very short. There were a total of four questions asked and two were from them, the only UPS franchisees. Another question was asked. "Are you going to buy Big Brown, the horse." He said that was the extent of it.
Wightman closed saying, "I don't know how anybody can be prevented from attending a shareholder's meeting when their name is on the roll. They have the names. All they need is their social security number and driver's license. Shareholders were there by proxy or by being in the room [meeting]." He feels someone needs to check on SEC rules.
Blue MauMau was told by UPS’s press room that comments regarding the shareholder meeting would have to come from its Investor Relations department. Prior to publishing, a phone call was not returned. UPS’s comments will be reported as soon as a spokesperson responds.
In looking at this year's UPS shareholders' report on litigation, it now states:
UPS and Mail Boxes Etc., Inc. are defendants in various lawsuits brought by franchisees who operate Mail Boxes Etc. centers and The
UPS Store locations. These lawsuits relate to the re-branding of Mail Boxes Etc. centers to The UPS Store, The UPS Store business model, the representations made in connection with the rebranding and the sale of The UPS Store franchises, and UPS’s sale of services in the franchisees’ territories. We have denied any liability with respect to these claims and intend to defend ourselves vigorously. At this time, we have not determined the amount of any liability that may result from these matters or whether such liability, if any, would have a material adverse effect on our financial condition, results of operations, or liquidity.
Related reading:
- Franchise topic:
From the Proxy posted on the UPS Investor relations website:
What do I need to show to attend the annual meeting in person?
You will need proof of your share ownership (such as a recent brokerage statement or letter from your broker showing that you owned United Parcel Service, Inc.’s stock as of March 10, 2008) and a form of photo identification. If you do not have proof of ownership and valid photo identification, you will not be admitted to the annual meeting. All bags, briefcases and packages will be held at registration and will not be allowed in the
meeting.
I'm just stating something that took me all of ten minutes to find on the company website. I assume that the proxy statement was available online prior to the meeting (I could be wrong), so it's UPS's fault that they followed the rules that they outlined to be able to attend the meeting? Shame on them.
They did mail out proxies, but also people could've signed up telling them that they were available via e-mail instead. I don't work for UPS, I'm just stating what I found.
I'm also trying to point out the fact that Ms. Sparks seems to go to the trouble of posting these stories without getting readily available information and just wants to show that 'franchisees are good' and 'franchisors are bad'.
If it was stated in the proxy that you needed that information, I don't have any problem with them not allowing these two individuals entrance. If they allowed others without the same information in, then i would have a problem with singling these two individuals out. There is nothing in the article as to whether that happened or not. How did the other two franchisees get in.
As for the litigation, if it's not material then it wouldn't need to be disclosed either in the financials. Once it was certified as a class action lawsuit, then it probably became material in their and their auditor's eyes. For a company like that, there is no reason to disclose a lawsuit that might cost them a couple of hundred thousand in the long run, and I'm sure most stockholders would agree with that assessment.
And yes, I do find that Ms. Sparks leaves things out.
You state:
1. The proxy stated proof of ownership!, not that you had to have all proxy materials in your possession.
2. The two individuals did not receive their annual reports, is it too
much to ask if the proxy statement came with the annual reports.
Reply:
If you didn't get your annual report or your proxy statement for the meeting, why not call up UPS investor relations and ask them to send you one? Is it that hard to do? Maybe the broker didn't send it, I don't know.
You state:
It certainly appears that they were singled out, there is no mention that anyone else was barred. Did every shareholder in attendance have to show their proxy statement. Somehow, I don't that this is the case!
My response:
Maybe the other people didn't get on the phone and call Ms. Sparks. You don't know that there weren't other people not allowed in, or maybe the people actually read the proxy or called to get a new one if they didn't get theirs in the mail.
You state:
It would appear material in that hundreds of franchisees are involved and also the fact that the one case that was settled so far cost
$5,000,000! - Clearly 130 times $5,000,000 is a material amount,not the couple hundred thousand you mention.
My response:
The couple hundred thousand that I mention is based on if it was a single litigant (not class action). Even at $5,000,000 it's not material for a company making $40-$50 billion/year. As a class action it has the potential to be material, that's probably why it was disclosed this year.
You state:
This is a company that knew the central states teamsters issue was material and never mentioned it in annual reports until a $6,000,000,000 charge reduced 2007 earnings to an amount less than the dividends paid out. Is that the way a responsible company treats its shareholders?
My response:
If you have an issue with this, sue the auditor. They signed off on it, and they had to have a reason to not disclose it. My guess, is that it wasn't finalized and a 'good' estimate wasn't known at the time of the financial statements.
Well, things change, and these franchisees weren't prepared for that change. What was needed was stated in their proxy, so I don't see how UPS can be blamed in this instance.
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