Angry UPS Franchisees Behind Closed Doors of Shareholder Meeting

WILMINGTON (Blue MauMau) - While UPS held its annual meeting Thursday at the Delaware Hotel DuPont, two shareholders who were planning to attend spent their time in a coffee shop downstairs. "We were denied access to the shareholders meeting because we did not have our proxy statements or something from our brokers," said a disgusted Mail Boxes Etc. franchisee from Manhattan. Joe Wightman said he had attended previous meetings by only giving his social security number, saying his name was on the list. But at this meeting the rules had changed. He and Jim Humbert, an operator from Vermont, were told that they had to have the proxy in order to get in. When Wightman tried explaining his previous experiences, they were soon met by three men wearing lapel pins signifying they were ex-U.S. marshals. He said they had no choice but to leave. Wightman felt another curious thing was that neither one of them received their UPS annual reports in the mail this year.

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:

• UPS Shareholders Report
• Franchisees Protest at UPS Shareholders Meeting