US companies embrace virtual annual
Moving from a conference centre
to the internet allows you to boast about improving shareholder access
Marni Halasa of New York, a
veteran of protests at Citigroup's AGM, dresses as the © Getty
Dressed in spandex, brandishing a whip and holding a sign that said,
“Bankers need a spanking.”,
Marni Halasa protested outside
Citigroup’s annual meeting in New York in 2013. A year earlier Wells
Fargo’s annual meeting in San Francisco attracted hundreds of
activists in the streets outside and a smaller number, who bought
shares, disrupted the meeting from within.
Suddenly, the attractions of
hitting the road grew.
JPMorgan Chase graciously laid on water and portable toilets for any
protesters who wanted to sit in a pen outside its annual meeting in
the outskirts of Tampa. Few did. Wells Fargo decided it would visit
Texas; Citi has ventured to St Louis; Goldman to Salt Lake City. No
major US company is believed to have selected Antarctica.
But now they don’t have to. In those San Francisco protests,
Mother Jones magazine
interviewed one protester who explained her presence: “It’s about
doing things in real life, like, physically.” Which suggests a
workaround. An increasing number of states — including, notably,
Delaware, where many companies are registered — now allow “virtual”
meetings. Here is the best part — moving from a conference centre to
the internet allows you to boast about improving shareholder access.
Now investors can submit questions online from anywhere in the world!
They can vote at the push of a button!
One recent convert, HB Fuller, a California-based adhesives company,
was “pleased to inform” its shareholders in the proxy filing that
announces annual meetings that it was not stuck in the past — it would
hold its first “completely virtual” meeting. Hewlett-Packard and its
spin-off HP Enterprise have gone virtual. GoPro’s shareholders, who
might well like to meet the well-paid management of their
poorly-performing company, cannot. SeaWorld Entertainment, which would
probably receive animal rights protests, is virtual only. Yelp, the
struggling reviews business, and El Pollo Loco, a chain of chicken
restaurants, have also gone virtual.
The disinterested observer can sympathise, in part. An annual meeting
can be tiresome, dominated by gadflies, priests and union officials
whose pet issues often have little to do with the core business. It is
rare for a heavyweight institutional investor, or even sellside
analyst, to cross-examine management. Activist battles are largely
waged in the run-up and most voting occurs in advance. Only Warren
Buffett can be counted on to throw a good party.
It is no surprise, then, that there appears to be rapid growth in a
virtual solution. Broadridge Financial Solutions, the leading virtual
meeting service, hosted only one virtual-only meeting and three hybrid
meetings in 2009. In 2015 it did 90 virtual only meetings and 44
hybrids. Cathy Conlon, vice-president of strategic development at
Broadridge, says the increase in 2016 is likely to surpass the 44 per
cent year-on-year increase in 2015. “The numbers are looking pretty
strong for proxy season,” she says, and points to “the ability to have
more transparency and the ability to have more shareholders
This is only really true for the companies who use video or audio (the
vast majority select only audio) as a supplement rather than a
substitute to a physical meeting. Calpers, the large California public
pension fund, is one of many to argue against virtual only meetings
but more apolitical funds are not too bothered.
Mike Mayo, a banks analyst at CLSA, sees the rise of virtual meetings
as “a further marginalisation of the shareholder-company bond”. And
indeed one of the first virtual meetings, from software company
Symantec, drew complaints from shareholders that their online
questions had been ignored. Harder for that to happen face to face.
Institutional investors may prefer private meetings with management,
but as Mr Mayo notes, any concerns raised there may never reach the
independent board of directors. He adds: “Just because the
institutional investor community has fallen short in holding boards
accountable shouldn’t mean that boards provide even lower service to
Ms Halasa, who now protests as part of a group called Revolution is
Sexy, says: “To keep this sanitised environment that effectively
quashes dissent is not in a company’s long-term interest.”
They are both right. The fact that few bother to use them effectively
does not mean that an annual meeting is useless. Companies should
think hard about joining the motley crew who have gone virtual only.
Using technology to broaden access is well and good; using it to shut
out shareholders is another.
Copyright The Financial Times Limited 2016.