More and more companies are moving to virtual-only or hybrid (both virtual and physical) annual shareholder meetings, though they remain in a substantial minority. Other companies sometimes pause to consider virtual meetings as they begin the annual proxy season sprint, then abandon the notion due to the press of time. Many (most?) companies haven’t yet considered them at all.
In truth, there is much to be thought through, and much to be put in place, before taking the virtual meeting plunge—so much so that companies with spring proxy seasons have likely missed their chance for this year. Now is the perfect time, however, to tee up the issue for next year while management and the board of directors is focused on the annual meeting process.
What is a virtual annual shareholders’ meeting?
Virtual meetings can take many forms. Some are solely audio, much like most quarterly earnings calls. Others include video, much like a typical webcast. And as mentioned above, some companies (often those transitioning from physical to virtual-only meetings) hold hybrid meetings.
Essentially, shareholders are issued a verifiable control number that allows them to access a secure meeting page, where they may listen to the meeting presentation and vote (if they have not already done so by proxy or if they wish to change their prior vote). Often they can ask questions, whether in real time by audio or electronically, or by submitting questions ahead of time.
The meeting details and logistics of a virtual meeting can be tailored to the needs of each company, based on its analysis of its shareholder base and the message it wants the switch to convey. While a number of vendors provide a virtual meeting platform and support services, Broadridge appears to be the market leader.
What issues should be considered?
The primary goals for shifting to a virtual meeting are cost reduction and being perceived as technologically savvy. Though there was some early concern that companies might use virtual meetings to hide from direct interaction with their shareholders and that activists would, therefore, oppose them, that has not happened as electronic communication has become mainstream in all aspects of our society.
More specific issues include:
- Does a hybrid phase-in make sense in light of your shareholder base (for example, institutional versus retail focus) and company profile (for example, long-established traditional versus new software or Internet focus)?
- Do your charter and bylaws and the laws of your state of incorporation permit virtual-only meetings?
- Though both NYSE and Nasdaq permit virtual-only meetings, double check the rules applicable to your company for nuances that might impact your approach.
- Is the not-insubstantial cost and time commitment of providing video worth it?
- How will you handle Q&A?
- How will the inspector of election count the votes?
- How will your independent auditors and directors participate?
- Do you have adequate internal capabilities or will portions of the process need to be outsourced?
- Will sufficient technology safeguards and redundancies be in place?
Keep in mind that this is ultimately a decision for your nominating and corporate governance committee and board of directors. Investor relations will also need to be involved. Be sure to build in enough time for management to first evaluate the pros and cons and then present them for thorough discussion to the NCGC and the board. Because this process could take several months, it makes sense to introduce the idea now, complete the evaluation and decision-making process in the fall and, if it’s a go, be ready to switch next spring.