The arguments in favour of virtual meetings are not just compelling, they are grounded in common sense.OLIVIER DOULIERY/AFP/Getty Images
Ian Robertson is the chief executive officer of strategic shareholder advisory and governance firm Kingsdale Advisors.
The shift toward virtual-only shareholder meetings is a trend that deserves unequivocal support. Accelerated by the pandemic, it revealed virtual meetings as not merely a temporary necessity but a forward-thinking approach that represents a bold step toward redefining the essence of shareholder democracy.
The arguments in favour of virtual meetings are not just compelling – they’re grounded in common sense, efficiency and inclusivity. Those who argue against this practical tool sound like old-time economists: “Sure, it works well in practice, but will it work in theory?”
Unlike the bureaucrats and academics who opine on this issue, I actually attend shareholder meetings. I help plan them, too. Here’s the reality: 97 per cent of shares are voted well in advance, making the meeting a formality. If shareholders do attend, they rarely ask questions. If they do, they are related to the management presentation – which is not a legal requirement – and often only do so to give themselves a soapbox for airing grievances.
There is a misconception that a shareholder right to participate includes a right to disrupt. The meetings with the greatest attendance are not those that allow for the greatest participation, but the ones targeted for protest – with many attendees purchasing a single share just to get inside. Special-interest groups that don’t even own shares, just find someone with the minimum holding required to submit proposals they advance to justify their existence.
A physical meeting introduces a crowd dynamic that allows for a hijacking of shareholder democracy, not an enhancement. With the majority of shareholders already giving the board a clear mandate in advance, why do we allow those who hold less than 0.01 per cent of stock to own the day? That is not shareholder democracy at work. In a democracy, the will of the majority prevails, not those with the shrillest voices.
What goes into putting these meetings together? Hundreds of employee and adviser hours, hundreds of thousands of dollars, and many months. Not because a meeting creates value for shareholders, but to sidestep criticism from armchair governance gurus over minor oversights. It is akin to the Ford Motor Co. spending time maintaining the horse-and-buggy industry for fear of what horseshoe advocates will say.
Virtual meetings offer unparalleled convenience, allowing shareholders from any corner of the globe to participate, fostering more diverse participation. It’s a leap forward in shareholder democracy, offering every shareholder the chance to realize their rights – to be heard and engage directly with leadership in a way traditional meetings never could.
If a board unduly restricts constructive participation in this forum, then they should absolutely be held accountable by shareholders who should vote them out at the next opportunity.
The notion that virtual meetings dilute or restrict engagement is a straw-man fallacy. Quarterly earnings calls have always been virtual and attended by the harshest critics – the analysts who assign ratings – and so demonstrating that the approach provides accountability.
The primary defence of in-person meetings that their advocates rely on is that they are necessary for engagement. But if engagement is the real issue to be addressed, then isn’t the real question: What is going wrong during the other 364 days of the year that makes this one hour once a year the solution to deficient shareholder engagement? There is no doubt boards should be doing a better job when it comes to director-led engagement, but it doesn’t happen from a podium in a cavernous room.
The argument that virtual meetings filter shareholders’ questions ignores the technological advances specifically designed to ensure that questions can be submitted in a transparent manner. Recording meetings, including logs of questions submitted and making them available later ensures nothing is hidden. The engagement is different, yes, but not lesser.
It is also curious that many of those pushing to maintain in-person meetings are also pushing companies to go green. Why then are we making shareholders burn fossil fuels to travel and cutting down trees to print materials when an internet connection can achieve the same result?
For those professional protesters who are believe their rights are being trampled on, there’s a solution. Rather than gaming the system to get access to a meeting, become a meaningful shareholder, and engage constructively throughout the year by meeting at investor days, requesting meetings with both management and directors, and sharing not just ideas but well thought-out solutions in presentations. The board you are targeting will have no problem in creating value for you, too.
Accountability is not a function of physical presence but of the structures and processes in place to ensure leadership is responsive to shareholders. This can and should be done using innovation to enhance these processes, rather than clinging to expensive outdated modes of interaction.
Having used their hard-earned money to purchase shares, investors want executives focused on creating value, not being bogged down discussing minutiae such as what the meeting’s catering requirements will be.