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See also

Agenda for July 13, 2010 Open Meeting

To Be Decided: Standards for Fair Conduct of Investor Communications


Mr. Silverman, the workshop leader who presented the special project report below, is also a member of the Program Panel for the Forum's E-Meetings program.



Special Project Report


For Presentation at July 13, 2010 Open Meeting of the Shareholder Forum

by David A. Silverman, workshop leader


Communication Between the Board of Directors and the Shareholders:

Opportunities and Considerations


This report will attempt to identify keys issues relating to the communication and interaction of the board of directors and the shareholders in the context of modern electronic communications.  Ultimately, the Board must decide how they want to interact with shareholders and whether an emeeting or other technologically enabled communications can be additive to that process.  To compile the report, I have discussed this topic with board members at corporations of varying sizes, institutional investors, and asset managers.  The report attempts to capture the range of views and identify some key issues for Boards to consider when making a judgment.  It is intended as a catalyst for an ongoing discussion at the Forum meeting and beyond.


Continuum of Director-Shareholder Interaction


An annual meeting has to be viewed in the context of a broader program of shareholder and board communications, whether those communications are electronic or face to face.  Directors and investors expressed interest in a constructive dialogue and thought that this dialogue should extend beyond the annual meeting to a regular program of communication between directors and shareholders during the course of a full year. Directors thought they could understand the shareholder base by attending a few events during the year, for example, analyst days, meetings at investment conferences, and one on ones with investors and management.  The requirements for the annual meeting can therefore vary based on other opportunities for interaction.  If, for example, a company holds an analyst day with executive management and directors attending and interacting with shareholders, then the level of activity at the annual meeting might be less than a company that does not host such an event. 


Because most votes at the annual meeting are cast in advance, there is an inherent timing problem in hosting a discussion at the meeting itself.  While more interaction is likely helpful on the margin, the participants would often be effectively discussing next year’s business because the proxies for that meeting had already been cast.


Both directors and shareholders favored direct, in person interaction between the company and the investor base, especially when a potentially contentious issue has arisen.  While the exact degree of management and board attention to this direct interaction was subject to a broad range of views, directors and shareholders both believed they had personally benefited from having a face to face interaction. Directors wanted to be informed of all substantive inquires from shareholders, at least in summary fashion.  Directors should also be aware that investor attitudes to a company and to the board specifically are influenced by whether they believe there is an ongoing dialogue and response to their concerns.  The Board must decide on a process of meeting and responding to inquiry.  Even when there is a difference of opinion between the board and a particular investor, a meeting was often valuable to both sides.  Boards should be aware that shareholders are concerned that emeetings should not be used to discourage direct interaction.


Electronic Communication at the Annual Meeting


The concept of an emeeting is still new, and none of the participants expressed a “killer application,” that they felt makes an emeeting a compelling option.  At this point, it is certainly a tool that can be used creatively by companies interested in improving their investor communications.  As directors decide whether and how to implement an emeeting, they should be aware that there was strong opinion on behalf of several investors that any emeeting maintain certain minimum standards:

·        Shareholders should still be able to attend a live, in person annual meeting with the management and the directors present, if requested.  While all participants may agree that the typical meeting may not have a large number of in person participants, investors draw significant comfort from the idea that this option is there.

·        Shareholders should be allowed to question both executives and directors during the meeting.


Boards and executive managements considering an emeeting should attempt to identify some clear goals they have for the extension of the annual meeting to electronic communication.  Possible goals might include:

·        A forum where the company can reach shareholders with whom they are not otherwise able to communicate effectively.  This could include companies with retail shareholder bases making themselves more available or smaller companies that have difficulty attracting institutional attention making it easier for institutions to learn more about the company and what it is doing.  Several participants mentioned that the Board should think of the annual meeting and the broader scope of shareholder communication as more of a marketing opportunity to present the company’s approach to governance and strategy.

·        Creating a record of availability.  If a company takes questions from any shareholder able to attend the annual meeting via an emeeting, for example, then the company may find that record useful in future dealings with shareholders.  A key point that arose from my discussions was that sometimes directors were not aware of matters that shareholders had raised in the past and that led to a problem in board-shareholder communications.

·        Creating a relationship with the governance groups at larger shareholders.  At some investors, the financial analysis and governance analysis function are not performed by the same group.  The Board may want to have a relationship with both constituencies.

·        Creating a relationship with shareholders outside of intermediaries. Directors were interested in understanding at least who their most significant shareholders were, and forming some sort of relationship with them.  This can be useful in the event the board wants to take an action, that they believe is in the best interests of shareholders, but where they will need to convince the shareholders to vote against the advice of a third party advisor.


I would like to thank the directors and shareholders who provided input to this report.  I can be reached at


July 8, 2010


David A. Silverman

Blue Harbour Group

Corporate Governance Committee of the New York Society of Security Analysts (NYSSA)




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