Sarah Jones: Incredible Performance

Lawyers and Dysthymia

Lawyers tend to suffer from all kinds of maladies. Now, we have to worry about "dysthymia," too:

My kind of depression is termed “dysthymia” in the DSM IV (mental health’s diagnostic “Bible”). With dysthymia, a person can still function—after a fashion. However, life’s colors are faded. It’s more difficult to enjoy pursuits that had, not long ago, brought pleasure. We withdraw from our closest relationships.

More here. I think the lesson is not to go into divorce law, aka family law. I used to make appearances for other lawyers in family court, and I got really sad after spending just an hour in court. Many people in family court are self-represented (pro se). It is hard to see people go at each other in public, especially when kids are involved.

Teacher's Unions Suing California

The CFT--California Federation of Teachers (how many teachers' unions are there?)--is suing California to get taxpayers to give them more money:

http://www.mercurynews.com/ci_12328660 (SJ Merc article published on 5/8/09, Sharon Noguchi)

Unbelievable. The timing of the lawsuit makes it appear they're trying to usurp the voters if we go against their funding demands. It's important to try to work with all entities, especially when education is involved, but that's hard to do when California's teachers' unions sue the state. After all, they're really suing the taxpayers.

WH Auden on Mass Media

Attributed to W.H. Auden, one of my favorite poets:

What the mass media offers is not popular art, but entertainment which is intended to be consumed like food, forgotten, and replaced by a new dish. This is bad for everyone; the majority lose all genuine taste of their own, and the minority become cultural snobs.

• "The Poet & The City" (p.83)

Google's Annual Shareholder Meeting (2009)

I attended Google's (GOOG) annual shareholder meeting today, May 7, 2009. As usual, the meeting took place on Google's campus. In the past, meetings were an intimate, casual affair. Larry Page and Sergey Brin, Google's founders, would sit on stools and answer shareholder questions. I loved watching these two young men up-end Santa Clara County's normally uptight corporate culture. Sergey was especially fun to watch, because if he didn't think your question or comment had merit, he'd take you on directly. During one meeting a few years ago, when a shareholder chastised Google for not doing enough to combat China's censorship, saying other companies were being more pro-active, Sergey sneeringly pointed out that Yahoo had just helped China jail a reporter. In any case, I should have known it was all too good to be true. This year, neither founder attended the meeting. The meeting took place in a larger conference hall instead of an upstairs room above the cafeteria. I suppose this development is a natural progression--more shareholders attend the annual meeting, and most companies move away from their founders as they grow. Still, I hope Sergey and Larry come to next year's meeting. It wasn't the same without the two of them sitting up there, jeans and all, ready to answer questions without a corporate-style verbal filter.

I missed the lunch, which was held at 12:30PM. (I still managed to get two It's-It ice cream treats and a cold salad to tide me over). The meeting itself started at 2:00PM. David Drummond, Google's Senior VP and Chief Legal Officer (and a Santa Clara University graduate--go Broncos!), handled the formal part of the meeting. During the formal part of the meeting, a Chinese activist [Update: his name is Jing Zhao] wanted to make some comments on a shareholder proposal relating to online censorship; however, Google's procedures do not allow ordinary shareholders to make comments on proposals prior to voting. Google only lets the shareholder who placed the proposal on the ballot to speak for a few minutes. Thus, Google acts as a partial censor at its annual meeting--at least with respect to comments that may impact how shareholders vote on stockholder proposals.

Many shareholders vote their shares in person at the meeting and may be influenced by shareholder comments. Allowing ordinary shareholders to comment on proposals only after voting is closed is tantamount to the American government banning CNN from making political comments until after national election polls are closed. Google ought to limit the time a shareholder can speak on proposals to three minutes and let anyone who wants to comment specifically on a proposal have their say. This change would strike a reasonable balance between allowing activists to disrupt the meeting and restricting the flow of information to shareholders.

As for the person who wanted to speak, his first language isn't English. I've seen him at other shareholder meetings commenting on stockholder proposals relating to China. He is against China's censorship policies, but his broken English makes him difficult to understand. In this case, when he wasn't given an opportunity to speak, he quietly walked out of the meeting. When he tried to speak at Cisco's annual shareholder meeting, the CEO allowed him to speak briefly. After the meeting, a Cisco investor relations representative took him outside and listened to him. Cisco handled the situation much better than Google, but I am confident Google will learn from this experience.

CEO Eric Schmidt handled the informal portion of the meeting. He spoke for about ten minutes. His main points were these:

1. There is no recession in information.
2. Google is making advertising ridiculously easy.
3. Mobile is wherever you are. ["Search" can be part of the person, unrestricted to a place.]

During the Q&A session Mr. David Drummond talked about censorship as being bigger than just China. He said it also took place in non-authoritarian countries. In a really interesting comment, he said that police have visited Google in the middle of the night because Google would not share information. He later mentioned Germany and France as two non-authoritarian countries that apparently engage in some censorship.

A shareholder asked about company morale now that Google's "legendary" perks have been reduced. CEO Schmidt said Google still had amazing perks, including fifteen(!) food options/cafeterias. Mr. Schmidt is correct--Google still has fantastic perks, and the perks aren't limited to tangible items. A casual stroll through Google's offices shows that employees have the freedom to do pretty much anything. One employee, Mr. Tan Chade-Meng, has pictures with lots of famous speakers posted outside his office, and most Google employees decorate their work space as they see fit. I saw a bunch of international flags, stickers from different American states, and even pictures promoting a pirate club. Google even has on-site medical doctors who can prescribe medication, so no employee has to go to the hospital unless something really serious happens. Of course, Google employees still get free food, soft drinks, coffee, and massages (Google gives massage certificates to employees on their birthdays). Google employees may also bring a friend twice a month to the cafeteria for a complimentary meal. In short, I wouldn't worry about Google's employees. They are expected to work hard and are allowed wide latitude as long as their work gets done.

Another shareholder asked Google not to split its stock. He was concerned with market manipulators and short sellers.

Other shareholders commented on how to improve various services, especially Google's language translation tools.

Overall, Google's shareholder meeting was well-done, but not a great experience. It almost felt like the company had matured into just another big corporation. Many shareholders fell in love with Google because of Larry and Sergey's vision. Without them at the meeting, Google risks having a so-so shareholder meeting instead of an annual event on par with Berkshire Hathaway, Apple Inc., and other wonderful companies.

Bonus: here is Eric Savitz's take on the meeting. The picture above is of Eric and me. For those of you who follow his blog, he seems like a really cool guy.

Audiocasts of annual meetings are here. Video of the annual meeting is here.

San Jose Water Company Annual Meeting (2009)

SJW Corp (SJW), otherwise known as San Jose Water Company, held its annual shareholder meeting on May 6, 2009 at its local headquarters. A plate of cookies, coffee, water, and a selection of moist cake slices were offered. About ten shareholders attended, but most of the room was filled with company employees. Most of the shareholders were senior citizens who had probably bought SJW for its consistent dividend. (SJW currently yields 2.8%.)

Norm Mineta, San Jose's former mayor, is on SJW's Board of Directors. It was a pleasure meeting him. If you're ever in downtown San Jose, go to City Hall and go to the second floor (same floor as the Council Chambers). Right outside the elevator is a wall with pictures of San Jose mayors. Mr. Mineta's picture is on the wall of mayors, and it's a fantastic picture, because he looks so young. Mr. Mineta was one of the few government officials who spoke out against racial profiling post-9-11. As a result, many San Joseans--a very diverse lot--are forever grateful to him.

SJW has an enviable business model: one, a captive customer base; two, a product everyone needs, no matter what the business climate; and reasonable government cooperation. With banks and car companies failing left and right, many investors are looking for a stable business. It's worth noting that San Jose Water Company has been around since 1866.

There are some problems, however. The pension is underfunded by around $38 million (See 10K: page 56). With only 324 employees (10K: page 52), that means the pension has a gap of $111,111 per employee. The CFO indicated the pension is less than 80% funded, triggering various IRS rules which activate after various thresholds have been breached. Also, the company is top-heavy--with only 324 employees, it has 101 "executive, administrative or supervisory personnel" (10K: page 53).

The company's CFO addressed some of these issues: first, the $38 million number does not include recent stock market gains; and second, the company recently modified its pension plan, "replacing a defined benefit pension formula with a more portable cash balance formula" (See attachments to letter to shareholders).

I asked whether the company had insurance in case a natural disaster affected operations. The company does not buy insurance--it's too expensive--but has been given permission to set up a fund into which customers will pay for disaster damage through rate increases. SJW's "insurance" is basically its customer base.

I asked whether the company has preferred shares. It does not.

Another shareholder asked why the company was expanding in Texas. (A Board member, Kathleen Armstrong, has been added to assist the company with Texas operations.) The company indicated that Texas was a growing state with a better political climate.

Another shareholder asked whether SJW employees get free water. The company responded that employees within the service district receive discounted--not free--water, and the company only had 324 employees.

Another shareholder talked about accounting problems at a southern California water company. SJW did not want to comment on another company's issues.

It was a short, amiable meeting. I will attend next year to see if I can take a picture with Norman Mineta. I will ask him if the fabled "baseball bat" stories are true. ("Damn government took my bat again" has got to be one of the best quotes ever by a public official.) If SJW has some initiative, it may want to buy a Louisville Slugger and have Mr. Mineta sign it every year at the shareholder meeting. Most companies should be creative when it comes to their shareholder meetings. With a distinguished citizen like Mr. Mineta on its Board, why waste an opportunity to boost company morale?

For more SJW's Q1 2009 earnings call transcript, click here.

Disclosure: I own fewer than 10 SJW shares.

S&P Hits Target

On April 1, 2009, I predicted the S&P would hit 950:

http://willworkforjustice.blogspot.com/2009/04/personal-s-target.html

I later clarified that my prediction was a range between 920 and 950. The S&P hit my range on May 6, 2009. My prediction was correct. From April 1, 2009 to May 6, 2009, the S&P rose 13.3%.

I want to emphasize something. As of May 7, 2009, I am not making any prediction about the future direction of the market. I have no idea what's going to happen. As a result, I am mostly in cash and money market funds, along with some TIPs. I've also opened up two credit union accounts. I'm only earning 1.5% interest there, but it's better than my brokerage's 0.5% rate.