March 16, 2020

Annual Meetings: Corp Fin Issues “Covid-19” Guidance

Friday afternoon, to accommodate companies and shareholders who are changing their annual meeting plans in response to COVID-19, the SEC announced that Corp Fin was providing Staff guidance about compliance with federal proxy rules for upcoming annual shareholder meetings – this includes guidance about virtual shareholder meetings.  Here’s an excerpt from the press release:

The staff guidance provides regulatory flexibility to companies seeking to change the date and location of the meetings and use new technologies, such as “virtual” shareholder meetings that avoid the need for in-person shareholder attendance, while at the same time ensuring that shareholders and other market participants are informed of any changes.

Under the guidance, the affected parties can announce in filings made with the SEC the changes in the meeting date or location or the use of “virtual” meetings without incurring the cost of additional physical mailing of proxy materials.

The guidance also encourages companies to provide shareholder proponents with alternative means, such as by telephone, to present their proposals at the annual meetings in light of the difficulties that shareholder proponents face due to COVID-19.

Virtual Shareholder Meetings: CII & Proxy Advisor Positions

Many have been wrangling with all the considerations of holding virtual-only or hybrid shareholder meetings during this time of “social distancing.” This Perkins Coie memo provides considerations from the West coast and this blog from Bass, Berry Sims does a nice job discussing practical considerations, including considering views of institutional investors and proxy advisors.  We reached out to Amy Borrus from the Council of Institutional Investors and she kindly provided this statement about CII’s position on virtual-only shareholder meetings:

“CII generally has opposed virtual-only shareholder meetings, in favor of a hybrid approach. Given coronavirus concerns, it is reasonable that some companies will go to virtual-only this spring. But we hope they will make it clear that this decision was one-off, and that they follow best practices for making any virtual meeting participatory.”

Meanwhile, this NYT DealBook article includes a statement from NYC Comptroller Scott Stringer:

The funds he oversees ‘will not take action against boards holding virtual-only annual meetings due to the coronavirus that disclose their rationale and affirm their commitment to holding in-person meetings in the future.’

State laws and company organizational documents may prevent some companies from holding a virtual-only shareholder meeting.  But legal issues aside, virtual meetings aren’t without criticism.  Among other things, some investors say the meetings don’t allow shareholders to interact with management and directors and there are concerns that shareholders might not be able to get all questions answered, etc.  This criticism has led some investors to vote against directors at companies that hold a virtual-only shareholder meeting.

Due to these concerns (and others), it’s understandable why companies might be hesitant to shift to a virtual-only meeting format – so the statements from CII and the NYC Comptroller may help some companies who’ve been wrestling with the decision about what to do.

What about ISS & Glass Lewis? At least for this year, they’re relaxing their policies.  This Cleary memo covering virtual meeting considerations includes the updated guidance from ISS and Glass Lewis released by Kingsdale Advisors. Glass Lewis also has a memo on its website – here’s an excerpt from Cleary’s memo:

Glass Lewis: Consistent with its current 2020 proxy voting guidelines, Glass Lewis has indicated that it will continue to review an issuer’s proxy materials regarding virtual shareholder meetings. Pursuant to its 2020 guidelines, Glass Lewis will generally recommend voting against governance committee members where the board is planning to hold a virtual-only shareholder meeting and the company does not provide robust disclosure in their proxy statement assuring shareholders that they will be afforded the same rights and opportunities to participate as they would at an in-person meeting.  The memo includes examples of what Glass Lewis considers “effective disclosure”.

Glass Lewis stated that, in context of coronavirus, companies that have already filed their proxy statements and provided information for an in-person meeting but are moving to a virtual-only meeting should provide public disclosure explaining the rationale. Such disclosure should specifically state that the change is due to the coronavirus outbreak, include complete information about accessing the meeting and confirm shareholders will have the same opportunities to participate – as they would have had at an in-person meeting.

ISS: Though it has not previously adopted a formal policy on virtual shareholder meetings, ISS stated that in light of the coronavirus outbreak and the rapidly changing environment, ISS expects that institutional investors will likely be more accommodating of virtual meetings this year.

Like Glass Lewis, ISS stated that it will require companies to provide comprehensive disclosure affirming that a virtual meeting will provide full opportunities for shareholders to participate, ask questions, provide feedback to the company and present shareholder proposals.  ISS also indicated that it anticipates the way in which companies manage virtual meetings this year will impact its future position on virtual shareholder meetings.

Virtual Annual Meetings: Sample Disclosures

John blogged last week about resources addressing the various legal considerations on “going virtual” for this year’s shareholder meetings.  For those looking for sample disclosures, here are a few that might help.

BNY Mellon’s 2020 proxy statement provides a sample of a company planning to hold an in-person shareholder meeting but also contains the following precautionary statement:

As part of our precautions regarding the coronavirus or COVID-19, we are planning for the possibility that the annual meeting may be held solely by means of remote communication. If we take this step, we will announce the decision to do so in advance, and details on how to participate will be available at

Other examples of precautionary statements regarding annual meeting plans due to COVID-19 can be found in the 2020 proxy statements (most commonly in the Notice of Annual Meeting page of the filing) from Bank of America (also on its annual meeting microsite), Citigroup (pg. 7), Moody’s Corporation, Northern Trust and Teledyne Technologies.

Examples of companies that have held virtual-only or hybrid meetings that some investors might view as being run well include Intel, Ford and ConocoPhillips.  I found the following information after taking a look at each of the companies’ 2019 proxy statements.  Perhaps some investors would find similar meeting formats and information transparency somewhat more acceptable, especially this year.

Intel’s 2019 proxy statement included instructions with links that helped shareholders submit questions in advance and also during the meeting.  The proxy statement also said the company would make a replay available on its Investor Relations website and Intel’s Investor Relations website also includes answers to investors’ questions from the 2019 meeting.

Ford’s 2019 proxy statement includes a full-page of instructions for last year’s virtual-only meeting.  The instructions provided information for shareholders to submit questions in advance and during the meeting, and provided a toll-free telephone number for someone to call if they ran into technical difficulties.

ConocoPhillips held a hybrid meeting and its 2019 proxy statement included instructions for attending in person or for viewing a live video webcast of the meeting.  The proxy statement also provided information allowing shareholders to submit questions in advance of the meeting.  The company has a link on its Investor Presentations website to access a replay and a transcript from last year’s meeting.

And, for anyone interested in following Warren Buffet’s lead, he announced last Friday that Berkshire Hathaway’s annual meeting will be streamed online by Yahoo Finance without shareholders present – here’s the story from CNBC.

– Lynn Jokela