Among the many consequences of the global health crisis, there has been a rapid proliferation of virtual annual shareholder meetings. Going forward – in those states where virtual meetings are permitted – companies will have to determine whether to return to meetings with a physical component when it is safe to do so or stay with the virtual-only format. Buy-side support for virtual-only meetings will principally hinge upon one thing: transparency.
The advantages of virtual annual shareholder meetings are undeniable.
- They are less expensive to undertake.
- They remove impediments to shareholder attendance.
- The technology platforms have improved dramatically.
But many influential investors have remained negatively predisposed to virtual-only meetings.
- Nothing can replace looking officers and directors “in the eye.”
- Investors are sometimes poorly apprised of virtual meeting logistics (e.g., how can questions be asked, how can proposals be submitted, etc.).
- It’s too easy for officers and directors to avoid questions from online queues versus those asked during in-person meetings.
As a former institutional investor who now advises the boards of many Nasdaq companies, I can see both sides of the argument. It’s arguable that the stakes are the highest for small-cap companies, since the cost savings can be more material for them and for many of their retail investors. Said differently, this is not a one-size-fits-all discussion.
As small-caps deliberate their future meeting plans, here are some things they should consider discussing.
When in doubt, ask. Companies shouldn’t decide upon upcoming meeting formats without first conferring with their largest investors. And, in order to make sure that boards hear investor feedback directly, a board member should consider being present for those discussions.
Hold the phone. We live in a world where five billion videos are watched every day on YouTube, and where video streaming platforms and high-resolution computer cameras provide inexpensive, seamless virtual experiences. While virtual meetings can certainly have telephonic components, investors are unlikely to be supportive of telephonic-only meetings.
Make it easy. Companies can simplify shareholder participation in virtual-only meetings, or they can complicate it. Investors know that complexity tends to thwart transparency. Communicate with shareholders sufficiently in advance of a virtual annual shareholder meeting – and in plain English – so that participation is foolproof.
Display the questions. Excepting those that are plainly malevolent or irrelevant, all shareholder questions should be visible to all attendees to obviate concerns that the company is “cherry-picking” which ones to acknowledge. Questions that go unanswered during the pendency of the meeting should be subsequently answered and posted on the company’s website.
Attendance is mandatory. Officers and directors all need to “attend” virtual annual shareholder meetings, and all of them need to be prepared to respond to shareholder questions – full stop.
Quantum leaps in virtual meeting hosting platforms have forever changed the vector of debate regarding online annual shareholder meetings. The question going forwards for companies and investors is what constitutes an acceptable level of transparency.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.