Shareholders? Not at These Shareholder Meetings
Scott M. Stringer, the New York
City comptroller, hopes to stop the trend of shareholder
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
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.
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
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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.
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.
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
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.
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.
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.
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
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.
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
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.
course, a hybrid meeting would also allow Duke’s shareholders around
the globe to participate. But never mind that.
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
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.
Lutin heads the
Shareholder Forum, which convenes independent workshops to
help investors make sound decisions. A 2010 program examined
online-only shareholder meetings.
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.
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.
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.”
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
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