Virtual Annual Meetings – A Great Idea

We have been around annual shareholder meetings for over 30 years, and have served as inspector of elections in more than 300 such meetings during the past 10 years, so we have a pretty good perspective on them.  We have also seen the advent of virtual shareholder meetings (VSMs), and have served as inspector at a couple of these as well.  Our message in this short article is:  VSMs are great for the vast majority of annual meetings that happen in the U.S. today.

The fact is, 95+% of annual meetings are not “contested” when it comes to directors being elected, auditors being ratified, additional shares being authorized for issuance in a stock plan – or even with respect to the relatively recent “say on pay” proxy proposals.  In other words, it is fairly rare for vote results at annual meetings to produce surprises, especially given the increased use of proxy solicitors for even “routine” meetings, and the increased savvy on “vote getting” within corporate management as well.  That is why traditional annual meetings that offer up a corporate conference room, or nearby hotel “salon,” typically garner only a smattering of shareholder attendees, and usually one or two of these at most ask a question of the Chair – the answer(s) to which do not produce much, if any, enlightenment.  Remember, annual meetings do not draw large, sophisticated institutional investors seeking answers to the really tough questions.  Those investors have many other, more convenient and effective opportunities and venues to interrogate executive management – and not just once a year.

So why have the annual meeting a drive or flight away from most retail shareholders?  Why not have the meeting online, so an unlimited number of shareholders can log on and dial in, vote their shares if they want, and ask questions?  Do VSM naysayers really think denying “mom and pop” their coffee and Danish in a hotel or company conference room is robbing the investing public of their voice?  Again, even if one physically attending shareholder had a really good complaint to aim at the CEO during the meeting, in the typical venue now only a handful of other people likely representing a fraction of a percent of the company’s outstanding stock would hear it – and an even smaller subset of them would care.  Remember again, the typical annual meeting in the U.S. today is not the venue where CEOs are made to face the music with investors, let alone change their behavior.  Only in those rare circumstances when the meeting is contentious, or is an all-out proxy fight, is that the case.

So we think for normal annual meeting situations VSMs should be standard procedure.  There are all kinds of online enhancements that can make the shareholder experience more robust, enlightening and, yes, entertaining as well.  Does there need to be an also standard protocol whereby tough questions management does not want to be asked still get raised by shareholders, and answered?  Absolutely!  And we believe shareholders as a group are smart enough to blow the whistle on management when that isn’t happening.

Regarding VSM naysayers’ contention that VSMs should be “hybrid,” i.e. have a physical venue available along with the online one, we disagree for routine meetings.  We do agree with hybrid for the less than 2%, certainly less than 5%, of meetings where anything of great importance might come out of the event – a circumstance almost always known well in advance.