The necessity of having virtual shareholder meetings this past proxy season due to the COVID-19 pandemic has further questioned the necessity of the in-person annual meeting.
In a previous article, I challenged the in-person annual meeting’s questionable utility, covering, in general, the various, more timely ways for companies to disseminate information and the expanded channels of communication for shareholders to make their views known. The virtual meeting can, in fact, be a very low cost, efficient way to encourage board and management interactions with shareholders.
While some companies had taken notice of virtual avenues for the annual meeting—248 in 2019—the expansion of remote business operations has necessitated that even more annual meetings go virtual. In 2020, the number of companies conducting virtual meetings increased by over 500%, to almost 1500. Despite some difficulties in transitioning to this new format, many companies are now considering going completely virtual for meetings after the pandemic is over. A corporate communications company reported that 75% of its clients that conducted virtual shareholder meetings were considering doing so next year.
These meetings are typically far shorter than their in-person counterparts, often clocking in at around a half-hour or less. Some groups have expressed concerns with shareholders not being able to have open discussions or present proposals depending on a meeting’s rules. Companies can respond to these concerns by creating guidelines for the presentation of questions and keeping meetings as personal as possible through video conferencing, not just a telephone conference. This year’s virtual meetings also experienced numerous technical difficulties among companies not familiar with the technology protocols they were forced to adopt for the occasion.
Interactive, video conference annual meetings can address shareholder grievances about not being able to participate in the same manner as at an in-person event. The hybrid meeting can be a way to accomplish much of a virtual meeting’s efficiency while providing in-person communication.
Boards should discuss with management in the coming months the format that they think is most appropriate for their annual meetings in 2021. With the issues that arose in 2020, boards must be proactive when it comes to how shareholder questions are handled, feedback from attendees, and technological logistics. It would be useful for management to ask large shareholders about their thoughts on virtual meetings. By next Spring, we will know if COVID-19 largely spelled the end of the in-person annual meeting. At a minimum, I hope that companies have hybrid meetings and, over time, eliminate the in-person annual meeting.
Jonathan F. Foster
Founder – Current Capital Partners LLC