Advances in technology have enabled companies to consider options for hosting annual shareowner meetings online. A new resource seeks to help them as they consider the pros and cons of doing so.
The Virtual Annual Shareowner Meetings Study Group—comprised of 17 executives representing institutional investors, public companies, and proxy and legal service providers—has released a whitepaper called “Principles and Best Practices for Virtual Annual Shareowner Meetings.” It identifies principles and best practices companies should consider when managing virtual meetings.
The term “virtual meeting” refers to a meeting in which shareowners are able to attend the meeting online via the internet, be certified electronically as a company shareholder, ask questions of the board of directors and management, and cast their votes online in a secure manner while the meeting is in progress. There may or may not be a corresponding in-person meeting.
The phrase “virtual-only shareowner meeting” refers to a meeting of shareowners that is held exclusively through the use of technology (either online audio or video), without a corresponding in-person meeting.
The term “hybrid shareowner meeting” refers to an in-person, or physical, meeting that shareowners are also able to attend virtually either through an online audio or video format, and if they wish to do so, cast votes online.
In 2017, 212 companies held virtual-only annual meetings and 24 companies conducted hybrid meetings, combining a physical meeting with a virtual one. While this still represents a small percentage of the over 4,400 U.S. annual shareowner meetings each year, the report observes that there is a clear growth trend.
Despite growing adoption rates, there remains considerable debate over virtual shareowner meetings. Proponents say that virtual participation in shareowner meetings presents an opportunity for shareowners that cannot travel to more easily attend and participate. Some endorse virtual-only sharowner meetings, noting that few shareowners physically attend smaller companies’ shareowner meetings. Critics, however, are concerned that virtual-only participation could diminish the ability of shareowners to fully participate and have their questions and concerns heard without the risk of management exerting excessive control. If virtual technology is used to replace in-person meetings, in this view, the only opportunity for shareowner engagement with independent board members may be lost.
“Every issuer will decide for itself the best way to conduct its annual meeting” a preamble to the working group’s paper says. “Our purpose here is to ensure that when companies do opt for virtual participation in shareowner meetings, they are accessible, transparent and efficiently and cost-effectively managed, while meeting the important business and corporate governance needs of shareowners, boards and management.”
Questions companies should consider asking themselves, as detailed in the report:
Do we have adequate technology to reach all shareowners, as well as management, who wish to participate?
Do we have a plan in place to give equal opportunities to both in-person and online participants (in the case of a hybrid meeting)?
Are we enabling meaningful engagement with shareowners?
Does our investing base broadly understand why we are holding the meeting virtually?
Is this virtual meeting in the best interests of the majority of our shareowners?
Do we have a plan in place to ensure that shareowners have opportunities to ask questions outside of the parameters of the virtual meeting?
Once a company has decided to hold a hybrid or virtual-only annual meeting, the report suggests guiding principles that the working group has generally agreed upon, following a review of applicable state laws:
Broad investor participation in annual meetings should be valued and encouraged.
Virtual technology should be used as a tool for broadening, not limiting, shareowner meeting participation.
A virtual option, if used, should facilitate the opportunity for remote attendees to participate in the meeting to the same degree as in-person attendees.
Shareowner meetings should promote equitable and equal treatment of investor participants.
Issuers should communicate the benefits of a virtual meeting to shareowners and clearly communicate clearly what a virtual meeting is and how they can meaningfully participate.
Virtual shareowner meetings should provide the same opportunities for questions and dialogue as an in-person meeting.
The report also outlines suggested best practices that may be amended, as needed, to accommodate specific companies and their shareowners:
The board needs to be fully aware of prospective investor reactions before deciding between a virtual-only, hybrid and in-person-only meeting.
Companies should evaluate shareholder responses to previous meetings held virtually and consider requests to attend subsequent meetings in person.
The format of the meeting and participation instructions should be clearly disclosed in the proxy statement.
Companies should fully and annually evaluate their technology and process for the meeting to ensure maximum shareowner participation.
After conducting an annual shareowner meeting that enables virtual participation, companies should evaluate whether goals were met and where they need to make changes.
Allow shareowner proponents to present their proposals on a “virtual basis,” whether via a phone line or a pre-recorded or online video presentation.
Open video, web lines and telephone lines should be implemented before the meeting to allow shareowners to test their access and be sure they will be able to participate in the meeting.
When a company typically conducts a shareowner question and answer period after the official business of the meeting, it needs to ensure the ability of virtual participants to participate in that portion of the meeting.
Companies should adopt formal, universal rules of conduct for participation in shareowner meetings.
Rules should allow sufficient opportunities for shareowners to ask questions or make brief comments about each proposal that is up for a vote, while being respectful of the time of all meeting participants.
The rules of conduct should be available before the meeting begins, and should be available to in-person and virtual attendees before and during the meeting.
As to the voting period, it is wise to always appoint an Independent Inspector of Elections to observe the virtual aspects of the meeting and review the final vote reconciliation prior to certifying the final results.
Companies should allow shareowners to present questions in advance of the meeting, via their investor relations website or a shareowner discussion group or bulletin board.
When there is a virtual component, companies should allow their shareowners to submit questions over the internet during the live meeting.
When there is a virtual component to the meeting, companies should consider including a toll-free number for their shareowners to call in during the meeting. Calls would be placed in a queue and taken in turn to ensure, to the fullest extent possible, that all shareowner questions will be taken on a first-come-first-served basis during the time that has been allotted for questions and general discussion.
Companies should set reasonable time guidelines for shareowner questions, whether related to proposals during the formal part of the meeting or the company’s overall business after the formal business of the meeting has been concluded.
Companies should publish rules clearly explaining when questions, taken either in-person or online, will be ruled out of order.
Companies that have a virtual component to their meeting, or that solicit questions in advance of the meeting, should strongly consider posting all appropriate questions that have been received during the course of the meeting — and the company’s answers — on the investor page of their website as soon as is practical after the meeting.
It is important for virtual participants to have the opportunity to see, hear and ask questions of board members and particularly independent board leadership. Where an independent director does not chair a board, an independent lead director should participate on at least an informal basis in chairing the meeting.
Companies should provide a technical support line for shareowners that may have questions about accessing the webcast.
Firms should archive the meeting on a publicly available website for a specific and reasonable period of time, ideally at least one year.
Companies and their boards should also consider the items to be voted on at the meeting as well as other issues that may be of current concern to their shareowners such as: whether the meeting may be limited to the consideration of routine or noncontroversial proposals; whether a significant business transaction, such as a merger, may be considered at the meeting; whether the company may be subject to significant shareowner dissent or activism concerns involving governance, operational or performance issues.
Broadridge is the leading third-party processor of shareowner communications and proxy voting. Each year, it processes the proxy voting for more than 80 percent of the shares of U.S. public companies.
The Virtual Annual Shareowner Meetings Study Group was formed in 2017 with the goal of developing principles and best practices for public companies on the topic of virtual shareowner meetings.