It was inevitable. Whether its a routine and recurring process or an opportunity to interact or engage, technology can offer a solution. That’s exactly what’s happening with corporate annual meetings. In July 2018, Broadridge reported that it hosted 212 virtual annual meeting in the first half 2018, up 18% from the same period in 2017. Virtual annual meetings can reduce costs and expand shareholder access. No wonder more companies are doing them.
Yet, this growth has some large institutions and their advisors wringing their hands that investors will lose a key opportunity to directly engage with boards and management teams if annual meetings go virtual. I also suspect some institutions worry boards may become less accountable to shareholders if not forced to look them in the eye.
As previously discussed, I believe this is really a question of form over substance. Annual meetings are a formality; the end of a process. The real substance of the matter is shareholder engagement. Managements and boards should understand investor perspectives and engage with them on issues meaningful to shareholder value. Today, investors have many tools to engage with companies beyond the annual meeting.
Nevertheless, I believe annual meetings – live, virtual or hybrid – should be conducted in a manner respectful of investors’ position as part owner. To that end, a committee of institutional investors, public company representatives and advisors have developed some basic principles and best practices for virtual annual meetings, which are generally reasonable. Not surprisingly, the committee places heavy emphasis on ensuring shareholders participating virtually have the same opportunities to present proposals, ask questions or make a statement as they would at a live meeting. The committee fairly notes this objective should be a determinant of how the meeting is conducted and what technologies are used.
I further agree with the committee that boards should thoroughly weigh the pros and cons of a virtual meeting in view of their shareholders’ sentiment toward such meetings (some have strong opinions which may affect the proxy vote), the issues to be voted upon (is it a routine meeting or are there controversial proposals) and other potential issues of concern. Boards should explain their rationale for the meeting format and communicate formal rules of conduct for the meeting, including outlining the Q&A process such as when questions will be accepted, and the time allotted in total as well as per shareholder.
I have a more skeptical view of the committee’s suggestion that companies consider making an archived replay of the meeting available. By their very nature virtual meetings are more accessible and snippets may go viral, potentially giving dissidents a larger platform to voice their agenda. Given that annual meetings are a formality and no news is typically announced, why take that risk?
The reality is the use of virtual annual meetings will continue to grow. In this brave new world, companies need to ensure the technology and format provides for a fair and equitable process, while investors need to recognize that engagement is not an annual event linked solely to the proxy.
Lead-IR Advisors, Inc.
Enjoy these posts? Sign up to received them via email
and like them on LinkedIn or Twitter.