Virtual Shareholder Meetings 2021. The Report of the 2020 Multi-Stakeholder Working Group on Practices for Virtual Shareholder Meetings came out about a month ago. I (James McRitchie) was happy to participate in the group, which did a good job of considering diverse views. Kudos to Amy Borrus, Darla Stuckey, and Doug Chia.
My major contribution ensured the report at least acknowledged the desire of shareholders to be able to discuss concerns informally with other shareholders and company representatives. For more on that concern, read Chat Rooms Missing at Shareholder Meetings summarized below.
Chat Rooms Side-Stepped
Chat rooms were side-stepped as an issue. Company officials think shareholders should get their own room if they want to chat. Why should the company pay shareholders to communicate with each other? Many view the meetings as company meetings, not shareholder meetings. Incumbent management and directors represent the company, not shareholders. My message to shareholders: this is about you, your ability to communicate, your ability to form communities of interest and influence. Chat rooms are the most critical component of virtual shareholder meetings. Without them, it is more difficult to form communities able to take corporations to the next level, whatever that may be in your own vision of the future.
One acknowledgment in the Report: “The aspiration of the 2020 Working Group is for companies, investors, and service providers to conduct VSMs in ways that replicate the in-person annual meeting experience for the shareholder as closely as possible in order to foster effective corporate governance.” Another, as currently practiced VSMs result in a “Loss of opportunities for shareholders to interact with eye contact, both formally and informally, with board members, company executives, and other shareholders.”
In the last section of the report, The Future of VSMs, the report acknowledged that in-person meetings give shareholders opportunities to make connections. We can potentially “build relationships with board members, company executives, and other shareholders.” “The question is whether the benefits of in-person shareholder meetings can be replicated at VSMs or replaced with something of value to both companies and shareholders.”
As the technology advances, VSM platforms will likely provide more tools for a truly interactive experience for boards, management teams, and shareholders. But technology alone will not reinvent annual meetings in ways that companies and shareholders find valuable. The value will be realized only if companies are willing to allocate resources to make their VSMs substantive and mutually beneficial experiences.
Virtual Shareholder Meetings 2021: Recommendations
TheCorporateCounsel.net summarized some of the shareholder concerns that the report says played out last year:
- General sense that companies had much tighter control over the structure and flow of the Q&A sessions than at in-person meetings, including a feeling that some companies were “cherry picking” innocuous questions and favorable comments over difficult questions and critiques.
- Apprehension created by a lack of transparency about certain companies’ use of discretion to combine or paraphrase similar questions or reword questions.
- ‘Suspicion that some questions asked and answered during the Q&A sessions at certain companies were generated by the companies themselves, as opposed to verified shareholders, with rehearsed answers from the meeting chairs as a way to avoid difficult questions and fill the time allotted for Q&A.
- Inability for shareholders to ask follow-up questions the way they could at in-person meetings.
- Loss of opportunities for shareholders to interact with eye contact, both formally and informally,with board members, company executives, and other shareholders.
The report recommends disclosure topics, platform considerations and meeting practices that companies could adopt to alleviate some of these concerns. Here’s what it says about running the Q&A session:
- Allocate ample time on the agenda for Q&A based on the number of questions submitted in advance and reasonably anticipated to be received during the meeting.
- Explain how much time will be dedicated to the Q&A session and how the company will handle questions it may not be able to get to before time expires.
- Explain in what order the company will be reciting and answering the questions submitted.
- Note whether the company will take multiple questions from a single shareholder, and if so, in what order.
- Identify each questioner before reciting his/her question.
- Recite, to the best of its ability, each question verbatim as submitted by the shareholder, rewording or paraphrasing the shareholder’s submission only when necessary to make it comprehensible.
- If answering once for multiple questions on the same topic, indicate that other shareholders submitted the same or a substantially similar question.
- Have members of the executive team and board committee chairs, in addition to the board chair (or lead director) and CEO, in attendance with the ability to audibly answer questions during the Q&A session as appropriate.
- Address all, or substantially, all questions received in advance of the meeting (if the company elects to solicit questions in advance).
Virtual Shareholder Meetings 2021: Not Discussed
As indicated above, the possibility of chat rooms is avoided. Another issue missing is timing. Soon after the Report was issued, I presented a proposal at Broadridge. Ironically, they facilitate most of the VSMs, so should be protocol experts. The report highlights the importance of voting:
Voting is a shareholder’s most important and powerful right. To that end, companies must: Provide a prominently visible and simple mechanism on the main VSM page for shareholders to vote their shares (and change their votes if desired) during the time the polls are open.
Unfortunately, the report does not state the obvious. Shareholders should be given time to vote after they hear the arguments presented at the meeting. At the Broadridge meeting voting was cut off the second I concluded my presentation. I submitted a question asking: “Why was voting concluded the second I finished presenting proposal #4, leaving no time for shareholders to vote?” Their response was that it was a “good question” but it “goes to the mechanisms of what we’re trying to do here.” Huh? I guess that’s for each of us to interpret. Dirty tricks hurt corporate reputations.
Virtual Shareholder Meetings 2021: Zippy Point
“At it’s heart, Zippy Point provides instructional videos for those in the corporate & securities law, corporate governance and E&S fields.” If you aren’t subscribing, you’re missing out. Broc Romanek, the Founder of Zippy Point conducted one of the better interviews with Doug Chia, who facilitated the Multi-Stakeholder Working Group. They cut to the chase, focusing on the Question and Answer sessions at VSMs. Good advice for virtual shareholder meetings 2021.
Virtual Shareholder Meetings 2021: Lessons from 2020 Research
For a more academic viewpoint, read the paper and watch the video, How Shifting from In-Person to Virtual Shareholder Meetings Affects Shareholders’ Voice, highlighting the research of Miriam Schwartz Ziv. This is a more wide-ranging discussion.
- Another Year of Virtual Shareholder Meetings
- Key Takeaways and Best Practices from Virtual Shareholders Meetings in 2020
- Shareholders Feel Muted as Companies Switch to Virtual Annual Meeting
- For historical perspective, when shareholder proposals on VSMs were allowed, see Virtual Meetings: Can Shareholder Proposals Stem the Tide?