Annual shareholder meetings can turn into red-letter days on companies’ calendars. Investors flock to certain events to soak in the wisdom of a celebrity CEO. Some meetings attract protestors focused on significant labor rights issues, environmental degradation, sexual misconduct scandals and more. On occasion, companies drop big news about new products or management changes.
Other annual meetings are less exciting affairs, to put it mildly. If you don’t think they warrant a trip to corporate headquarters in Omaha or Orlando or Oxnard, you’re not alone. A growing number of companies are gravitating toward virtual shareholder meetings, which facilitate participation and reduce the burden of attending for investors. They are also less expensive for companies to host than physical meetings.
According to a study by proxy advisory service ISS, the share of Russell 3000 firms that held virtual annual meetings grew to 7.7% for the one-year period ending in June. That continued a steady upward ascent from 2.4% over the last five years. Not surprisingly, companies in the communications and technology sectors – such as Zayo and Dell – have taken the lead in online meeting adoption. Software giant Microsoft also just announced that it has done away with physical shareholder meetings. The company claims that attendance at its annual meetings has fallen roughly 50% in five years.
“Attending” a virtual meeting requires nothing more than logging in, which is a plus for mom-and-pop investors who don’t have the time or money to travel for the event. Moving away from in-person annual meetings, however, has implications beyond just freeing up hotel space.
A virtual setting could cede greater control of the management-shareholder dialogue to corporate executives. At live shareholder meetings, individual shareholders get a rare opportunity to step up to a microphone and ask questions of management. This town hall aspect of shareholder meetings is one of the most anticipated, and cherished, features of the exercise. Microsoft, for its part, has said that its virtual-only version will do nothing to disturb it; the company’s virtual meetings “will offer the same opportunities to participate as provided at the in-person portion of our past meetings,” it said. At the same time, a company spokesman avoided directly stating whether the company would pre-screen electronically submitted questions before they are posted to management.
Additionally, it would seem that executives may feel less accountable for their decisions when they do not have to face a roomful of shareholders in person. As such, some proxy advisers and institutional investors are taking exception to the trend.
On a practical level, social activists also can’t stage protests at a virtual shareholder meeting. Companies likely view that as a benefit, even if they may not admit it. Reformers and outside stakeholders, on the other hand, would likely argue that their demonstrations at shareholder meetings offer a unique opportunity to raise awareness of their causes, and to put pressure on corporations to act on them.
There does seem to be an obvious middle ground that offers all of the benefits and few of the drawbacks of the virtual-only and live-only options. That is the hybrid meeting format, in which shareholders have the option to attend in person or online. Interestingly, however, only 10% of the 285 companies that held virtual meetings last year – such as Hain Celestial and NetApp – did so as an element of a hybrid format. The other 90% were virtual-only meetings, perhaps offering a vision of the future of shareholder relations.