January 20, 2022

Hybrid Shareholder Meetings: Here to Stay?

Several in-house people I’ve spoken with have said that having to plan a hybrid annual shareholder meeting would be the “worst of both worlds.” This format requires planning two simultaneous events and fretting about both in-person and technical mishaps. At the same time, some shareholders have grown to enjoy the easier attendance format for virtual meetings – while others still prefer the option of in-person interaction with directors. Some state corporate laws also require companies to conduct meetings in person, versus virtual-only.

There are signs that the meeting format is going to be a point of contention. A few months ago, I blogged on our members-only “Proxy Season Blog” that a majority of the voting power at Cracker Barrel had approved a shareholder proposal requesting the company to ensure it would hold its annual meeting in whole or in part through virtual means. This was after Corp Fin denied no-action relief to exclude the proposal on the basis of “ordinary business” in light of public health issues and technological advancements.

Now, as I mentioned earlier this week, Vanguard has added a section to its 2022 voting policies to address its stance on the topic. Here’s more detail – from page 18:

Hybrid/virtual meetings. A fund will generally support proposals seeking to conduct “hybrid” meetings (in which shareholders can attend a meeting of the company in person or elect to participate online). A fund may vote for proposals to conduct “virtual-only” meetings (held entirely through online participation with no corresponding physical meeting). To date, data show that virtual meetings can be an effective way to increase shareholder participation and reduce costs. Virtual meetings should not curtail rights — e.g., by limiting the ability for shareholders to ask questions. A fund will consider support if:

– Meeting procedures and requirements are disclosed ahead of a meeting;

– A formal process is in place to allow shareholders to submit questions to the board;

– Real-time video footage is available and attendees can call into the meeting or send a recorded message; and

– Shareholder rights are not unreasonably curtailed.

Vanguard’s move suggests that it anticipates more proposals on this topic, although it doesn’t specifically say that this policy is limited to proposals from shareholders. The conditions for support are factors that appear to be under management’s control.

Liz Dunshee