The Return of Virtual-Only Shareholder Meetings? Herman Miller's Third Year in a Row
Well, it's been done before. Annual meetings held solely online. Inforte was first company to conduct their annual meeting solely online in April '01. Ciber did it in '02 and ICU Medical in '04. Siebel Systems had plans to do it in '03 - but changed course in the face of criticism.
Now we have a relatively small company - Herman Miller - that filed this proxy statement last week, indicating that it would be the latest company to hold a virtual meeting. And you want to know the biggest surprise of it all - this will be the third year in a row that the company will do so! Slipped under the radar. Anyone aware of any other companies out there doing this?
Although I drafted them about eight years ago, these FAQs on conducting electronically-only meetings remains the best thing out there on the topic (because its about the only thing written on the topic) - it's posted in our "Annual Shareholder Meetings" Practice Area.
Here is one of the FAQs worth considering:
What risks does a company face if it holds an electronic-only stockholders' meeting with no physical counterpart?
Increased shareholder activism is quite possible - as well as potential negative media coverage based on the scorn of disappointed stockholders that like to have the opportunity to attend physical meetings.
Some investors have expressed concerns that electronic-only meetings would deprive them of the opportunity to meet with company representatives face to face. They believe that these physical meetings allow investors to better express their positions - and that management and the board listen more closely when communications are made in person.
After Delaware changed its laws in 2000, the Council of Institutional Investors wrote letters to the CEOs of all companies incorporated in Delaware urging them not to conduct electronic-only meetings. Unions also are concerned about the changes in the Delaware law.
Particularly for matters that are contested at a stockholders' meeting, electronic-only meetings pose the risk that a company can be surprised by large stockholders who vote at the meeting or change their vote - thereby making the outcome of meetings less predictable.
A risk for management is that an electronic-only meeting likely would result in greater attendance with more questions asked compared to a physical meeting - since attending an electronic meeting is fairly easy. This is a risk for those companies who like their meetings small and intimate (i.e. the fewer questions, the better) - but an advantage for those who don't mind the attention.
Whistleblowing and In-House Counsel: Not Blowing in the Wind?
From Keith Bishop: A few weeks ago, the 9th Circuit Court of Appeals delivered an opinion in Asdale v. International Game Technology. This case involved claims by two former in-house lawyers under the whistleblower protection provisions of Sarbanes-Oxley.
The lawyers' former employer argued, among other things, that they should not be able to maintain their SOX claims because doing so would require the use of attorney-client privilege. The 9th Circuit agreed with the analysis of the Third Circuit (ie. Kachmar v. SunGard Data Systems, 109 F.3d 173 (3d Cir. 1997)) and Fifth Circuit (i.e. Willy v. Administrative Review Board, 423 F.3d 483 (5th Cir. 2005)) - and held that confidentiality concerns alone did not warrant dismissal of the lawyers' claims. The 9th Circuit also noted that nothing in the SOX whistleblower provisions indicates that in-house attorneys are not also protected "even though Congress plainly considered the role attorneys might play in reporting possible securities fraud." We've been posting memos on this case in our "Whistleblowers" Practice Area.
Attorney-Client Privilege Issues for Executive Email Communications
Here's more news on the privilege front, courtesy of Mike Melbinger of Winston & Strawn from his "Melbinger's Compensation Blog" on CompensationStandards.com:
Because the work of executive compensation professionals often involves email communications among executives, I wanted to note a recent case on the extent to which the attorney-client privilege would apply to communications between the executive and his/her lawyer. The issue in Stengart v. Loving Care, No. A-3506-08T1, slip op. (N.J. Super. Ct. App. Div. June 26, 2009), was whether the privilege would apply to communications from an executive's personal email account, which the executive accessed from a company computer on company time (while at work), to an outside lawyer representing her in connection with her departure from the company.
This is an issue that should be important to anyone who:
- Advises executives in compensation and/or employment matters
- Advises employers in compensation and/or employment matters, or
- Drafts company computer-use policies
The application of the privilege to email sent from the workplace is fact-intensive. The factual analysis determines whether or not the communication was truly confidential. This is that case for both company-owned email accounts and personal email accounts accessed via company computers from the workplace. The leading federal case on the question, In re Asia Global Crossing, Ltd, 322 B.R. 247 (S.D.N.Y. 2005), lays out several factors to consider:
- Does the company maintain a policy banning personal or other objectionable use;
- Does the company monitor the use of the employee's computer or e-mail;
- Do third parties have a right of access to the computer or e-mails; and
- Did the company notify the employee, or was the employee aware, of the use and monitoring policies?
The approach adopted by the In re Asia Global court and every other court we surveyed, focuses on the effect that the company policy had on the employee's expectation of confidentiality. A strong and clear company policy can make it impossible for an employee to claim that his/her communication was confidential. On the other hand, a policy that is unclear or does not cover a certain type of electronic communication will leave the door open for the employee to claim that his/her communication was confidential.
However, the court in Stengart v. Loving Care held that emails sent by an employee from her personal, web-based, password protected email account, accessed from a company-owned computer while at work, were protected by the attorney-client privilege. The court held this, despite the company having a computer use policy which indicated that employees had no expectation of privacy in their computer use, and that all data stored, created, or transmitted via company computer was the property of the company. The Stengart court may have misunderstood the role of company policy. The issue should not be whether a court will enforce company policy, but rather whether company policy had the effect of placing the employee on notice that his/her electronic communications through company computers could not be considered confidential.
Many thanks to summer associate Ben Ellison from Notre Dame for his research and drafting help on this Blog.
- Broc Romanek