Companies Told to Weigh Investor Concerns With Virtual Meetings

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By Andrea Vittorio

The small but growing number of companies that hold their annual meetings virtually should do it in a way that takes shareholder concerns about a lack of face time into account, according to a panel assembled by Broadridge Financial Solutions Inc.

The 17-person panel offered recommendations April 11 on how to run a virtual meeting so that investors tuning in via audio and video can participate like they would in person. It also gave companies advice on allowing access to board members and deciding when a virtual meeting is the right way to go.

Companies say virtual meetings are more efficient than physical ones and let more investors take part. But they can also give companies more control over scheduling and questioning, which some shareholders worry could be used to shut them out.

Two companies that opted for virtual meetings in the past, oil explorer ConocoPhillips Co. and railroad operator Union Pacific Corp., returned to in-person gatherings this year after pushback from investors including New York City’s pension funds. The pension funds’ overseer, Scott Stringer, has threatened to vote against directors at companies he thinks are using virtual-only meetings to avoid their shareholders.

“I know there’s been this perception that companies are trying to hide behind the technology and not see their shareholders,” Cathy Conlon, one of Broadridge’s representatives on the panel, told Bloomberg Law. “It’s been our experience in working with companies to adopt virtual meetings that they really just want to do it in a way that’s good for the company and the shareholders.”

Upsides, Downsides

Only 53 companies held virtual shareholder meetings when Broadridge, which provides a platform for it, last convened a group like this in 2012. That number has grown, though it remains a relatively small percentage of the more than 4,400 shareholder meetings U.S. companies hold each year. Broadridge expects to facilitate about 300 virtual shareholder meetings in 2018.

Walden Asset Management’s Tim Smith, one of the investors concerned about virtual-only meetings, said some companies such as Intel Corp. are using the format to encourage more communication with shareholders. Others such as Comcast Corp. are using it to “abbreviate” their annual meetings, he said. Comcast’s meeting has gotten shorter since it went virtual.

Companies should have “a robust discussion” at the board level on “the upsides and downsides of this,” Smith, who leads Walden’s shareholder engagement efforts, told Bloomberg Law.

The panel’s guidance said companies facing shareholder dissent or those with a controversial item on their ballot should consider that when deciding on their annual meeting format. In situations like that, “it’s probably not in your interest to do a virtual-only meeting because you will take flak from shareholders for that,” said panel co-chair Darla Stuckey, who’s president and CEO of the Society for Corporate Governance.

Choosing between a virtual and in-person meeting “depends on what you think is going to happen” that year, she told Bloomberg Law.

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

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