Murray Stahl: FRMO Corporation Annual Meeting of Shareholders

Tuesday, August 26, 2014

Therese Byars: Good afternoon. My name is Therese Byars. I’m the Corporate Secretary of FRMO Corp and it is my pleasure to welcome you to the 2014 Annual Meeting of Shareholders.

Murray Stahl: Thank you, Therese, and thanks, everybody, for coming today.

I was very fortunate when beginning to write the annual Letter to Shareholders to be apprised of  an event that you may have read about in that letter. The idea was that we as a corporation were lacking in certain corporate governance formalities and requirements, one of which happened to be the lack of a compensation committee, and I took the occasion to comment on that. I hope you’ll understanding that I did it tongue in cheek. Corporate governance is a very serious matter, but in our case the recommendation of a certain proxy firm was to withhold the vote from us for, among other reasons, the lack of corporate governance relating to management compensation.

Now, there’s no excuse in a normal corporation for not having proper oversight of management. The only excuse we can offer on our own behalf is that we don’t actually receive compensation and, therefore, we didn’t think it was necessary to appoint a board, independent as they might be, and properly compensate them and incentivize them to rule on whether or not we’re actually going to be compensated.

Interestingly enough, you might observe that since we control the company we could dismiss the board anytime we wanted to. So we’d be supervised by people who effectively serve at our pleasure. I didn’t put this next point in the annual letter, but I might have. In terms of motivating us, our compensation is designed to come from our return as shareholders, and we don’t wish to get any other compensation. Of course, a compensation committee could theoretically overrule us and force us to take compensation. They might be within their rights and might arguably do that with the idea that if we don’t get compensation, how can they possibly motivate us to work harder, since only the threat of removing the compensation that we get would impel us to make the effort that’s really required. To put themselves in that position, they would have to first give us compensation and, as big shareholders, the compensation would actually come from us. We would be compensating ourselves.

Steven Bregman: Then if they did that we would have to fire them.

Murray Stahl: Yes. Of course, I respect the corporate governance process, and I trust we have been faithful to it because we are the fiduciaries, we are the custodians, effectively, of the shareholder trust among other things. We take that responsibly very seriously. But the question is larger. The question is about form versus substance. Is one a proper corporate steward because of the presence of certain formalities, or is one a proper corporate steward by taking that responsibly very seriously? That is the issue at hand and that is the best way of introducing what happened to us in a financial sense during the last year. I hope you will agree; we accomplished a lot.

We took the company up to almost, not quite, but almost $100 million of shareholders’ equity. I like to say—again tongue in cheek—that if we ever get to $100 million of shareholders’ equity we will finally be a real company. If you screened all the companies that are publicly traded in the United States of America, I think you would find that there are thousands that have lower shareholders’ equity than we have right now. We are not a small company anymore and we take those responsibilities very seriously. It is really an outgrowth of all that we have done in the last year.

Via FRMO Corp

See full Murray Stahl: FRMO Lacking Certain Corporate Governance Formalities and Requirements in PDF format here.

Murray Stahl: FRMO Corporation Annual Meeting of Shareholders