► Netflix and Intel among
U.S. companies to stop physical events
General Motors Co.’s annual meeting
last week lacked what used to be an essential element: shareholders.
For the first time, the
carmaker held the gathering virtually, answering questions investors
submitted online, joining companies like Lululemon Athletica Inc.,
Netflix Inc. and Intel Corp. in stopping physical events.
Not all investors were
John Chevedden, a
shareholder activist, called on GM investors to vote against the
appointment of three directors in protest of the automaker’s decision
to ditch in-the-flesh gatherings.
“An in-person annual
meeting is a motivator of good performance by management and
directors,” Chevedden said in a filing. “Who wants to stand in front
of a live audience and explain shrinking sales, epic recalls and loss
of market share? It is so much easier to explain it to a microphone.”
GM spokeswoman Juli
Huston-Rough defended the practice.
Online meetings “provide
better opportunity for more shareholders to participate regardless of
where they live,” she said in an emailed statement. “For many
shareholders, attending a live meeting isn’t feasible because of
geography or travel expense.”
In the U.K., the
Investment Association, a trade body that represents portfolio
managers who collectively oversee about $10 trillion of assets, has said it
doesn’t support virtual-only meetings. Lululemon’s billionaire
Wilson, the biggest individual shareholder, has complained
that the company’s switch to the format in 2016 thwarted
his ability to ask the board uncomfortable questions.
Still, the practice is
becoming more prevalent.
Solutions Inc., which offers firms a platform to host online-only
meetings, supported 257 such events in 2018, up from 212 in 2017 and
just one in 2009, when it introduced the product. Proxy adviser
Institutional Shareholder Services is currently tracking 186
virtual-only meetings that have already happened or are scheduled for
later this year.
Supporters of virtual
meetings say the cost savings can be significant and allow
shareholders worldwide to participate.
“Companies aren’t doing it
to hide, they just want to make the meetings more useful,” said Cathy
Conlon, head of corporate issuer strategy at Broadridge. “It allows
retail investors to have access to the company. People complaining
about virtual meetings are generally those who already have access to
Marc Goldstein, head of
U.S. research at ISS, said the most investor-friendly solution would
be a hybrid meeting combining a live event that’s also carried online.
For many firms, that defeats the purpose of making the virtual switch.
U.S. shareholders who
object to such shifts have little recourse. While companies that wish
to make the switch from physical meetings have to put that to a
shareholder vote in Britain and some other markets, there’s no such
requirement for most U.S. firms, according to Goldstein.
For now, most companies
haven’t abandoned traditional shareholder meetings, which give
mom-and-pop investors a platform to voice their ideas and concerns.
That can make for some awkward moments for executives. At Bombardier
Inc.’s event in Montreal last month, a shareholder who said he had
held the stock for almost six decades asked why the plane and train
maker, which is in the middle of a turnaround plan, hasn’t paid a
dividend for years while rewarding top executives with “staggering”
pay. His comments drew some applause.
But virtual-only meetings
can also be awkward. At Lululemon’s meeting, Wilson submitted eight
questions, most of which focused on whether the board had deliberately
ignored his questions at previous gatherings. This time, the company
offered answers to most of his questions and still managed to wrap up
the entire proceeding in about 20 minutes.
— With assistance by David Welch, and Sandrine Rastello
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