Virtual Shareholder Meetings
Tom Klein @ 2011-02-10
Promoting Shareholder Communication and
lowering the cost of corporate compliance, and this is most evident in the
technological advances in shareholder democracy. Technology has greatly
facilitated communicating with and informing shareholders, and mechanisms
for proxy voting have been greatly improved using various technologies over
the last decade. Corporations can realize substantial cost savings by using
new communications facilities for virtual shareholder meetings, but recent
steps by major corporations toward virtual-only shareholder meetings have
been met with protests from shareholder activists, even though virtual
shareholder meetings can enhance shareholder participation.
A leading provider of
virtual shareholder meeting technology is Broadridge Financial Solutions,
once a division of Automatic Data Processing, Inc., now independent.
Broadridge historically handled the back-office administrative processes of
distributing proxies and tabulating voting instructions from its bank and
brokerage clients. Broadridge recently developed and commercialized its
technology for virtual shareholder meetings. One can view Broadridge’s
technology in use for Symantec’s 2010 annual meeting at:
Other providers of similar technology are Wells Fargo Shareowner Services,
which hosted a Charles Schwab shareholder meeting in May 2010 and
Computershare announced a new meeting platform in mid-2010. Technologies
that qualify shareholders to vote in real time — as opposed to having a
pre-registration for voting sometime before the shareholder meeting — have
an advantage in promoting shareholder participation.
Delaware Leads the Way
Delaware in 2000 was
the first state to adopt corporate code provisions allowing for entirely
virtual shareholder meetings. Currently — according to a paper published by
Lisa Fairfax at the
University Law School in June 2010 — a total of 32 states have adopted
corporate law provisions allowing for either virtual shareholder meetings or
virtual shareholder participation at in-person shareholder meetings. Of
these 32 states, Ms. Fairfax found that 24 states have provisions allowing
for shareholder meetings that have no in-person component, a true
virtual-only shareholder meeting.
Corporation Law Section 211 provides that a corporation’s board of directors
alone may establish procedures for a virtual shareholders meeting provided
that (1) stockholders can participate, and (2) such stockholders can be
verified as present and voting at such meeting. The Board need only take
“reasonable measures” to verify the participants are stockholders or
proxyholders, and afford them an opportunity to participate and vote.
According to Ms. Fairfax’s study, 17 states follow
model, and the other 7 states allowing for virtual-only shareholder meetings
use more flexible provisions that merely require that shareholders hear and
be heard by the other shareholders.
There are a variety
of other restrictions and procedures for either virtual-only shareholder
meetings or remote shareholder participation imposed by other states. Two
states restrict the use of virtual-only shareholder meetings to private
companies only. Some states require that a provision for a virtual
shareholder meeting be specified in the corporation’s bylaws, and California
requires shareholder consent by each specific shareholder to any electronic
notice or electronic meeting, at least with regard to such individual
shareholder’s participation in such modes of communication.
Accordingly, it is
recommended to review and comply not just with the underlying corporate
statute, but also the corporation’s certificate of incorporation, bylaws,
and approved director resolutions, if provisions for virtual shareholder
meetings are required to be contained in these fundamental corporate
compliance officers should also ensure that these fundamental corporate
documents are in compliance with the underlying corporate statute. The
Delaware statute is usually amended annually in some fashion, and a
corporation’s bylaws may lag behind Delaware in being state-of-the-art.
To date, the major
stock exchanges have not added their own rules on virtual shareholder
meeting or remote shareholder participation for shareholder meetings. Their
rules remain straightforward in that they merely require an annual meeting.
Why the Fuss?
The protests against
virtual shareholder meetings are focused principally on “virtual-only”
shareholder meeting where there is no in-person component. Thus, the
virtual meeting, rather than promoting participation at the meeting by
allowing remote participation in addition to in-person participation, some
argue is constraining communication and deliberation by forcing all
shareholders into an impersonal electronic system. Some shareholder
activists believe that “virtual-only” meetings insulate management, limit
confrontation, limit questions to management, and therefore minimize
accountability of management to the shareholders. Intel in 2009 announced
that its shareholder meetings would be virtual only, but after complaints
from shareholders, Intel backtracked and went to a “hybrid” meeting
(in-person and virtual) for 2010. Proctor & Gamble amended its bylaws to
allow for virtual-only meetings, but after shareholder complaints P&G
delayed instituting virtual-only meetings.
protests (including those lodged by CalPERS and CalSTRS), held a
virtual-only meeting in 2010. A question was posed to management about the
format of the meeting, and CEO Enrique Salem noted that two to three times
as many people were attending virtually than had previously attended the
live meeting. It was not clear how many additional shares this additional
participation represented. The flap about the meeting format was reported
on the cover of the September 26, 2010, Sunday New York Times business
section (available at:
and Symantec later announced it would conduct a hybrid meeting in 2011.
Proponents of virtual
shareholder meetings argue that shareholder democracy and greater
accountability is promoted because of greater shareholder participation.
Proponents also say that questions posed online can be more frank and
confrontational than those made in person at shareholder meetings.
Furthermore, supporters say that Robert’s Rules of Order — the guidelines
for conducting meetings of deliberative bodies — are not sacrificed in the
virtual meeting, and that anything that is done in person can be done
virtually, including offering a streaming video of the meeting so
shareholders can view the body language of management.
Then, of course,
there is the issue of cost. Virtual-only meetings, even after the cost of
the technology services, are just a fraction of an in-person meeting.
Hybrid meetings of course add to the cost of the in-person meeting. Inforte
Corporation, which has had virtual-only meetings for several years, was
reported to have spent about 1/10 the cost of its in-person meetings.
about whether virtual meetings improve attendance or participation, and it
is not clear if these types of meeting will deliver on the real goal of
corporate democracy, that of improving corporate performance.
2011 Corporate Compliance Insights