Virtual meetings are quickly being adopted by entrenched boards who fear any attempt by shareholders, especially retail shareholders, to hold them accountable. Annual meetings are the only place shareholders are likely to meet with the managers and boards of the companies they invest in, as well as with employees of those companies and with other shareowners. Comcast (CMCSA) spins their May 16 meeting as one that “will provide expanded shareholder access and participation, improved communications and, over time, cost savings for our shareholders and company.”
If their real concern was to please their shareholders, Comcast would hold a hybrid meeting — allowing shareholders to attend in person or via the Internet. Don’t let them fool you, Comcast is locking out its shareowners to avoid embarrassing questions and accountability, not to reach out and communicate with their shareholders or to save a few dollars on coffee or a room rental. Shareholders are not clamoring for virtual-only meetings. The Council of Institutional Investors ($3 trillion in member assets) maintains a policy favoring hybrid meetings but clearly opposes stand alone virtual meetings:
Companies should hold shareowner meetings by remote communication (so-called “virtual” meetings) only as a supplement to traditional in-person shareowner meetings, not as a substitute.
Virtual Meetings: Growth Industry
I and others have spent at least some time fighting the trend since 2010 when we convinced both Symantec and Intel to drop plans for virtual meetings. Broadridge, the industry giant of virtual meetings, hosted just 4 in 2009, but 14o by 2015 — and predicts a further 44% increase for 2016. To read more about why virtual-only meetings are bad and what can go wrong, see UNFI Locked Out ShareOwners but We Voted to Declassify the Board, Broadridge Smokes Their Own Dope and many more prior posts.
Virtual Meetings: Investors Pay for Access
Investors pay $1.4 billion a year for face time with executives. Access usually is controlled by brokers and analysts at securities firms, who lean on their relationships to secure meetings for investors who steer trading business to the securities firms. Studies suggest that private meetings help a select group of investors make more informed trading decisions. (Renewed concerns about unfair access to investment information & What Are We Meeting For? The Consequences of Private Meetings with Investors) Annual meetings provide some of the same benefits at little or no cost to shareholders. We shouldn’t roll over on our right to real annual meetings, even if it takes a company-by-company campaign.
Virtual Meetings: Take Action Through Shareholder Proposals
I am willing to help any shareholder file a proposal requesting physical shareholder meetings at any company that has moved to virtual meetings. Just send me an e-mail to get started. Or, if you already have experience filing proposals, here is an example you can modify to fit your company.
Request Continuation of In Person Shareholder Meeting
WHEREAS: XX’s Board has passed a bylaw amendment allowing it to discontinue its physical stockholders meeting and hold a virtual meeting on-line.
While XX has not announced that it will abolish in-person meeting we find this decision alarming.
We strongly support the use of new technologies to make annual meetings accessible to stakeholders who cannot attend in person. This will make “attendance” simpler for investors globally and is a creative tool expanding outreach.
But we do not believe that Internet-only meetings should be substituted for traditional in-person annual meetings. Instead they should be a complementary. We believe the tradition of in-person annual meetings plays an important role in holding management accountable to stockholders.
In contrast, online-only annual meetings could allow companies to control which questions and concerns are heard and manipulate the exchanges between shareowners and the company. Face-to-face annual meetings allow for an unfiltered dialogue between shareholders and management.
The Council of Institutional Investors, a coalition of America’s largest pension funds with portfolios exceeding $3 trillion, has among its published corporate governance guidelines for public companies, “Cyber meetings should only be a supplement to traditional in-person shareholder meetings, not a substitute.”
Additionally, we believe in-person annual meetings are necessary for several reasons:
- Annual meetings are one of the few opportunities for top management and the Board to interact directly, face-to-face, with a cross-section of their shareholders.
- The digital divide persists in the United States and not all shareholders have access to computers.
- Annual meetings provide for direct questions to be posed to the Chair of the Audit, Compensation or Governance Committees of the Board.
- While some corporations argue eliminating face-to-face annual meeting can reduce costs and improve efficiency, we believe the investment in creating a physical space for shareholder meeting is money well spent.
- We believe XX’s decision is a controversial governance step for our company. This decision sets a precedent creating a “slippery slope” that encourages other companies to insulate themselves from shareholders. Imagine a company that wanted to downplay investor frustration over compensation policies or practices, or poor business decisions leading to substandard financial performance or questionable governance or environmental records. “Virtual” on-line meetings would be a perfect way to insulate themselves from shareholder interaction or to “spin” any opposition as insignificant.
- In addition, if there was a major crisis with a company, a merger being proposed or a significant shareholder proposal, the last thing investors would want is a company’s refusal to hold an actual stockholder meeting.
RESOLVED: Shareholders request that XX adopt a corporate governance policy affirming the continuation of in-person annual meetings in addition to internet access to the meeting, adjust its corporate practices accordingly, and publicize this policy to investors.
CONCLUDING STATEMENT: We ask our fellow shareowners to vote for this resolution supporting shareholder democracy and a continuation of the longstanding tradition of in-person annual stockholder meetings.
Virtual Meetings: Make History
The above template is derived from one created by Timothy Smith, Director of ESG Shareowner Engagement at Walden Asset Management. Smith and his clients were able to reach agreement, so I don’t think such a proposal has ever been filed. You can go down in history as being the first. Feel free to borrow from the above. Or, I’m happy to help you with the relatively small amount of work involved… even if you have never filed a shareholder proposal before. Let’s start the resistance in earnest. Shareholder meetings should not be democracy-free zones.