Meet the Shareholders? Not at These Shareholder Meetings
By GRETCHEN MORGENSON
Mar 31 2017
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 accountability.
At issue 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.
Virtual 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 management.
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.
Timothy 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.
“These 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 management.”
For 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.
But a 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.
Many of 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.