Protect the Stupid Question!

We are a fan of virtual shareholder meetings (VSMs), but one criticism raised by proxy advisors, activist investors and VSM naysayers in general is the apparent practice of some companies to omit questions input by shareholders into the VSM online platform which management does not want to answer, judging the question “inappropriate.”  We think such posture is short-sighted, for a number of reasons.

First, it comes dangerously close to – if not represents a clear example of – stifling Q&A that would have happened at an in-person meeting, in the process violating the spirit if not the law when conducting a meeting of and for shareholders.  Yes, technically the meeting is just to approve or not approve proxy statement proposals, but giving shareholders “their say” once a year, and management an opportunity to brag about its accomplishments and plans, are ingredients fully baked into U.S. annual meeting protocol.

Second, it insults attending shareholders’ intelligence.  Do shareholders really think that, when given a chance, at least one of their number will not press the “I have a question” button and ask a dumb or inappropriate question, at which most people will laugh and frankly enjoy the CEO or CFO squirming a little in answering it?  What we are suggesting is we think at least one, maybe two, such questions should be allowed to “get through,” adding credibility to the meeting without effectively costing management anything.  Indeed, it will arguably make management look better.

Third, since VSMs do make sense for the majority of American corporations, saving them money in the long run (despite healthy VSM hosting fees), why put their acceptance by the investing public and their advisors at risk by bluntly and insensitively turning off the less-than-brilliant questions spigot?  In fact, why not make the whole Q&A portion of the VSM twice as long as it tends to be now (10 minutes max?), further adding to the credibility of VSMs even if it makes senior management slightly more uncomfortable…once a year?

Companies should treat the VSM “gift” with care.  To abuse it, and lose it, would be a silly waste, in our opinion.