Rob Swystun, Pristine Advisers
More companies are embracing virtual annual shareholder meetings, even in the face of opposition.
As reported by Jena McGregor in the Washington Post, more companies (and more importantly more big companies) are trying the virtual-only meeting for their annual shareholder meeting.
This year sees Hewlett-Packard — probably the largest company so far — doing the online-only meeting thing, replacing the hotel ballroom with software.
According to Broadridge Financial Solutions, which provides online shareholder meeting technology, 21 companies used their software in 2011 and in 2014 that number had risen to 53.
While online only meetings may be an increasing trend, many companies — big and small — have been employing the hybrid meeting model where the regular shareholder meeting is augmented by virtual meeting elements so shareholders can take part in the meeting online.
McGregor says large companies like Intel and Procter & Gamble have considered going totally virtual in the past, and Symantec actually did it once, but they have faced resistance from shareholders over the idea.
Concerns about online-only meetings include:
- the company having more control over the questions they are asked and are forced to answer;
- hindering relationship-building;
- cutting into the all-important face-time that shareholders can get with the CEO and board, and
- the company being able to avoid embarrassing protests and face-offs with shareholders.
“Face time is still important,” McGregor quotes Natasha Lamb, director of equity research and shareholder engagement for Arjuna Capital, as saying. Lam supports the concept of hybrid meetings, but says “if you’re creating a virtual-only vacuum that becomes an echo chamber of management’s ideas, that’s a terrible idea.”
On the other hand, companies have said they like the online format because it saves money and attendance is fairly sparse for shareholder meetings anyway. Plus, it allows more shareholders to “attend” the meeting because it cuts costs for them, as well. They can also present a shareholder proposal remotely, which they are not able to do with a traditional meeting unless they actually travel to the site. It also allows them to ask questions of company management even if they are not in the same room as them, and they can do it anonymously, which may be beneficial for some people.
(Many companies, McGregor says, webcast their meetings, which allows people to view it, but not actually participate, which is not the same thing as having a virtual meeting where people can actually be engaged in the meeting.)
Although the online meetings would allow for questions, the way the meeting software is typically set up, attendees aren’t privy to the questions being asked, meaning they could easily be screened by the company. Plus, if someone has a follow up question to an answer they’ve received, that new question would go to the bottom of the question queue.
Also, even though shareholder attendance is sparse, those who can make the trip shouldn’t be robbed of the chance to actually see board members and look them in the eye and get that in-person experience, Nell Minow, vice chair of ValueEdge Advisors, says.
“In the law, when you’re talking about witnesses,” Minow said, “there’s a term known as ‘demeanor evidence.’ It means there are some things you can get only from being the same room and looking at them, and not what the camera chooses to show you.”
However, some investors aren’t that concerned with all of this. As Ed Durkin, director of corporate affairs at the United Brotherhood of Carpenters pension funds, points out, the annual shareholder meeting isn’t quite as important as it once was because there is much more engagement between shareholders and management nowadays over the course of a year than in the past.
He also says as long as minimal standards are being met, technology could replicate — for the most part — an in-person meeting and because Q&A sessions at in-person meetings are usually limited anyway, online meetings may serve to actually increase the number of questions that get asked.
McGregor says in-person meetings almost certainly won’t be disappearing any time soon. Perhaps the biggest disadvantage for companies of completely doing away with in-person meetings is that they would miss the opportunity to make an event out of it like Wal-Mart or Berkshire Hathaway does. The former treats theirs as a giant pep rally while the latter makes it a multi-day event with fun activities scheduled around the meeting.
Plus, as New York University professor David Yermack, who has studied shareholder meetings says, it’s tradition.
“This is a 400-year-old corporate norm, where once a year you have to face the owners of the company and answer for what you’ve done,” he said.
So, it seems the most likely outcome is companies will likely settle in the middle and hold more hybrid meetings, but we’ll have to see in the upcoming years if more companies opt to go virtual only. With the way technology is jumping ahead, in 20 years maybe they’ll have virtual reality meetings where it seems like everyone is in the same room or something (and everyone will look like a supermodel).