Forum Home Page [see Broadridge note below]

 The Shareholder ForumTM`

Fair Investor Access

See related case examples of

Dell Inc.

appraisal rights for intrinsic value realization

and

Walgreen Co.

stock buyback policies

"Fair Access" Home Page

"Fair Access" Program Reference

For graphs of specific company and related industry returns, see

Returns on Corporate Capital

For graphs of specific company voting for the past 5 years, see

Shareholder Support Rankings

 

 

 

Forum distribution:

Another round of controversy about the use of new communication tools to restrict instead of expand investor access

 

The Shareholder Forum's 2010 public program referenced in the article below was initiated by Walden Asset Management and supported by Broadridge Financial Solutions, Inc., both of whose current interests in "virtual" shareholder meetings are reported below, and also supported by Intel Corp., a pioneer of "hybrid" meetings, for the purpose of establishing marketplace standards for the use of electronic communications in shareholder meetings. Broadridge subsequently organized a private "working group" to present a 2012 "best practices" report" for its "virtual" meeting services.

Note: The "Shareholder Forum" service that Broadridge Financial Solutions offers to support its "Virtual Shareholder Meeting" product is not related in any way to the trademarked Shareholder Forum™ owned by The Shareholder Forum, Inc. We have asked Broadridge to use a different name for their service that does not suggest our support or endorsement.

For subsequently published reactions to the commentary below, see

 

Source: The New York Times | Fair Game, March 31, 2017 column


Business Day

Meet the Shareholders? Not at These Shareholder Meetings


Fair Game

By GRETCHEN MORGENSON    MARCH 31, 2017


Scott M. Stringer, the New York City comptroller, hopes to stop the trend of shareholder e-meetings. Hiroko Masuike/The New York Times

Companies can use technology to be open and transparent with their stakeholders, or they can deploy it to go underground. Now, as this year’s shareholder meeting season begins, investors are taking aim at directors whose companies use technology as a shield against accountability.

At issue is the increasingly common corporate practice of holding annual meetings that offer only online participation for shareholders. A change in Delaware law in 2000 allowed companies incorporated there — which include a majority of American public companies, and two-thirds of the Fortune 500 — to conduct their annual shareholder events remotely. Other states also allow such meetings, but some, including Massachusetts and New York, do not.

Virtual meetings, some investors say, cede far too much control to corporate managers during the sole event each year when they must look owners in the eye and listen to their views. Managers presiding at virtual-only confabs, critics say, can cherry-pick which shareholders’ questions to answer and prevent investors from communicating one on one with management.

 

Fair Game

A column from Gretchen Morgenson examining the world of finance and its impact on investors, workers and families


Want Change? Shareholders Have a Tool for That

MAR 24


Yes, Mr. President, Banks Are Lending

FEB 18

 2017


Your Mutual Fund Has Your Proxy, Like It or Not

SEP 23 2016


EpiPen Price Increases Could Mean More Riches for Executives Sep 1

Bloated Pay Came Before Hain Celestial’s Error AUG 19

A Simple Test to Dispel the Illusion Behind Stock Buybacks Aug 12

Investors Get Stung Twice by Executives’ Lavish Pay Package

Jul 8


How to Gauge a C.E.O.’s Value? Hint: It’s Not the Share Price

Jun 17


Fantasy Math Is Helping Companies Spin Losses Into Profits

Apr 22


BlackRock Wields Its Big Stick Like a Wet Noodle on C.E.O. Pay

APR 15


In Yahoo, Another Example of the Buyback Mirage

Mar 25


Stock Buyback Plans, Seen as Shareholder Boon, Can Backfire

MAR 11


FASB Proposes to Curb What Companies Must Disclose

Jan 2

2016


Valeant Shows the Perils of Fantasy Numbers

OCT 30

2015


Safety Suffers as Stock Options Propel Executive Pay Packages

SEP 13


Why Putting a Number to C.E.O. Pay Might Bring Change

Aug 9


Tech Companies Fly High on Fantasy Accounting

Jun 21


Stock Buybacks That Hurt Shareholders

Jun 5


Shareholders’ Votes Have Done Little to Curb Lavish Executive Pay

May 16

2015


When the Stock Price Hides Trouble

Oct 12

2013


An Unstoppable Climb in C.E.O. Pay

Jun 30 2013


See More »

   

Shareholder meetings may seem like highly ritualized events that only pretend to offer meaningful interactions between companies and the investors who own them. But it is undeniable that these events are the only time each year when investors can direct questions to company officials and air their praise or grievances.

Timothy Smith is the director of environmental, social and governance share owner engagement at Walden Asset Management, which oversees $3 billion. He often attends shareholder meetings and presents proposals on issues to be voted on by investors.

These are not management’s meetings, they are the meetings of the owners of the company,” Mr. Smith said. Online-only events give company officials “tremendous power over controlling, censoring and really limiting the engagement of share owners with the board and management.”

For decades, companies’ meetings were actual gatherings, often held at headquarters or nearby. In recent years, companies have added online functions, allowing increased participation by shareholders who cannot travel to the events. Investors have welcomed these hybrids.

But a growing number of companies have moved to online-only shareholder meetings. Last year, 154 companies conducted such events, up from 21 five years earlier, according to Broadridge Financial Solutions, which sells virtual shareholder meeting services.

Many of the companies limiting their meetings to the virtual world are small, and switched because shareholders rarely attended their in-person events. But e-meetings are also rising among companies in the Standard & Poor’s 500-stock index that have throngs of interested shareholders. Last year, 14 of these companies held online-only meetings.

It is too soon to tell how many companies will do so in 2017; companies typically advise shareholders about their meetings only when they file their proxy statements. But early indications suggest further growth this year. At least half a dozen large companies have said they will join the ranks of those offering virtual-only meetings in 2017. They include Ford Motor, Alaska Air, Duke Energy, ConocoPhillips and the GEO Group, a private prison operator.

Scott M. Stringer, comptroller of New York City and overseer of city pension funds with $170 billion in assets, hopes to stop this trend. His office recently began communicating with companies that held online-only meetings last year and whose shares the pension funds own. If they continue down this path, he said, the comptroller’s office will recommend the pensions vote against the election of all directors sitting on corporate governance committees at the companies.

Duke Energy is one company that has heard about the new policy. On March 24, Mr. Stringer’s office wrote to Duke criticizing the company’s plan to have an online-only shareholder meeting on May 4. A number of shareholder proposals opposed by management are scheduled to come up at the meeting, and some investors are concerned they will get short shrift. One proposal calls on Duke to issue a report on the public health risk associated with its coal use, and another asks it to assess the impact on its portfolio of limiting the global increase in temperature to 2 degrees Celsius, a goal agreed to in the 2015 Paris accord.

I asked Catherine Butler, a Duke Energy spokeswoman, why the company had switched to a virtual-only meeting. She said Duke was doing so in part because other companies were. The major reason: “We have a worldwide shareholder base, and we want to make sure the majority of shareholders have the ability to participate,” she said. The company’s response to Mr. Stringer’s office made the same case.

Of course, a hybrid meeting would also allow Duke’s shareholders around the globe to participate. But never mind that.

“It’s one of the great markers of American enterprise — whether you own one share or one million, you can speak at a company’s annual meeting,” Mr. Stringer said in a statement. “Except now, in this interconnected world, companies are using technological tools to whittle away at investors’ rights and hide from accountability. If boards shirk this responsibility, share owners should join us in holding them accountable.”

Mr. Stringer is not alone in his dislike for virtual-only meetings. The Council of Institutional Investors, a nonprofit group of corporate, public and union employee benefit funds and endowments, has urged companies using virtual meetings to do so only as a supplement to in-person gatherings.

Gary Lutin heads the Shareholder Forum, which convenes independent workshops to help investors make sound decisions. A 2010 program examined online-only shareholder meetings.

“Hybrid meetings allow shareholders to show up and participate any way they want to,” Mr. Lutin said. “There’s no reason to make it a pure virtual meeting other than to control the communication, and if that’s the purpose, that’s not consistent with annual meeting requirements.”

Investors have tried other methods to slow the e-meeting trend. Last fall, Mr. Smith hoped to put forward a shareholder proposal at Comcast, the media company, recommending that it have a hybrid meeting rather than just an online version. But Comcast received permission from the Securities and Exchange Commission to exclude the proposal from its proxy, so shareholders will not be voting on it this year.

Mr. Smith said he objects to virtual-only meetings in part because he’s had problems participating in them. At the 2012 annual meeting of United Natural Foods, a distributor of organic and specialty foods, his phone line went dead while he was commenting on a shareholder proposal.

Halie O’Shea, a United Natural Foods spokeswoman, said that after the 2012 meeting, the company moved to the hybrid model. “The company has high regard for Mr. Smith and is responsive to stockholders’ views and concerns,” she said in a statement. “The proposal which Mr. Smith spoke in support of at the 2012 annual meeting was ultimately implemented by our board.”

United Natural Foods did the right thing. But given that a growing number of companies seem to like what virtual-only meetings offer, withholding votes from their directors may be necessary to slow the trend. Individual investors who suspect that their companies are using e-meetings to armor themselves against shareholders may want to withhold votes as well.


 

A version of this article appears in print on April 2, 2017, on Page BU1 of the New York edition with the headline: Keeping Shareholders at a Distance.

 


© 2017 The New York Times Company

 

 

This Forum program is open, free of charge, to anyone concerned with investor interests in the development of marketplace standards for expanded access to information for securities valuation and shareholder voting decisions. As stated in the posted Conditions of Participation, the Forum's purpose is to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant is expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

This Forum program was initiated to address issues and objectives defined by participants in the 2010 "E-Meetings" program relevant to broad public interests in marketplace practices, rather than investor decisions relating to only a single company. The Forum may therefore invite program support of several companies that can provide both expertise and examples of leadership relating to the issues being addressed.

Inquiries about this Forum program and requests to be included in its distribution list may be addressed to access@shareholderforum.com.

The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.

Shareholder Forum™ is a trademark owned by The Shareholder Forum, Inc., for the programs conducted since 1999 to support investor access to decision-making information. It should be noted that we have no responsibility for the services that Broadridge Financial Solutions, Inc., introduced for review in the Forum's 2010 "E-Meetings" program and has since been offering with the “Shareholder Forum” name, and we have asked Broadridge to use a different name that does not suggest our support or endorsement.