Glyn Holton, the executive director of USPX, once again expresses his concerns over efforts by Broadridge Financial Solutions to make virtual meetings palatable to shareowners. I urge you to read his post, Locking Out Shareowners (For a Fee).
There are two ways to conduct a virtual annual meeting. One is to allow for both live or virtual participation. Such meetings have been called “hybrid” meetings. The other approach is to bar shareowners from participating in person and to allow only virtual participation. Broadridge likes to preserve the name “virtual” meetings for these, but that is sugar coating. If a state uses lethal injection to execute prisoners, we don’t call it pharmacological punishment. We call it capital punishment. Calling an annual meeting in which shareowners are barred from the room a “virtual” meeting emphasizes means over ends. Let’s call those meetings what they are. They are “lockout” meetings. If a company bars its employees from the factory floor, that is a lockout. If the company bars its shareowners from the annual meeting, that too is a lockout.
Holton has made his opinions regarding virtual meetings known before (see Broadridge Smokes Their Own Dope). Unfortunately, it takes an enormous amount of outrage to stir retail shareonwers to action. For example, although most shareowners believe CEOs are paid too much, only about 5% of retail shareowners who receive proxies on line (“notice and access) bother to vote. As a result, out of thousands of companies, only 43 had packages voted down as of the beginning of January 2012. I joined with Holton and other USPX members to draft say on pay voting guidelines, which I hope get more widespread use this year.
Like Holton, I agreed to serve on the “working group,” sponsored by Broadridge to develop best practices for interfacing shareowners attending online meetings via the Internet. I’m not entirely happy with the process either but I do think it is important that Broadridge hear from retail voters, so I will continue to try to influence practices employed for hybrid meetings. Like Holton and many others, including the $3 trillion Council of Institutional Investors (CII), I oppose “virtual-only” or “lockout” meetings. See CII’s Corporate Governance Policies, especially
4.7 Electronic 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.
Companies incorporating virtual technology into their shareowner meeting should use it as a tool for broadening, not limiting, shareowner meeting participation. With this objective in mind, 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.
I won’t go into detail, since I think airing differences in public prematurely can put others on the defensive and I want to give the process a chance to work. However, it should be clear that many of the participants who represent institutional investors are hoping the group will come up with best practices or at least considerations for hybrid meetings, not for virtual-only/lockout meetings, which we oppose.
For example, it is my belief that the online portion of hybrid meetings should be held to higher standards than those conducted entirely in person because those attending virtually will never be able to get the important, often subtle, experiences available only when attending in person. Like CII, I believe remote attendees should be able to “participate in the meeting to the same degree as in-person attendees.” Since they may be unable to pick up subtle clues lost remotely and may not be able to split their votes or to make nominations from the floor, reduced rights should be offset by enhanced elsewhere.
We’ll see how it goes. I respect Holton for his noisy withdrawal but I’ll be sticking around. I’m under no illusion the working group will deter Broadridge from facilitating lockout meetings. My hope is that any guidelines issued will be for hybrid meetings and will reflect best practices that will heighten the ability of those attending hybrid meetings online to be able to more fully participate. I hope the guidelines will also encourage companies considering lockout meetings to reconsider and move, instead, to hybrid forms.
The difference in cost between locking shareowners out of their own annual meeting, telling them to occupy some other space, is minimal in comparison with holding a hybrid meeting. Directors who approve of using the Internet to lock out shareowners may soon find their seats occupied by directors nominated and elected by shareowners.
Disclosure: I own a small number of shares in Broadridge.
Maybe you own enough shares of Broadridge to submit the USPX model proxy access proposal:
Or maybe a proposal asking Broadridge not to hold virtual-only meetings? If we can get them to adopt a policy against locking out their own shareowners, that would set quite an example.
I like the idea, but it may be difficult to get past Rule 14a-8(i)(1), which says a proposal may be excluded “if it is not a proper subject for action by shareholders under the laws of the jurisdiction of the company’s organization …” If I recall correctly, Delaware law places the siting of the annual meeting, including any decision to have a lockout meeting, at the board’s sole discretion. It would be great if you could submit some proposal to highlight the issue, though ….. let’s keep thinking of possibilities.