A recent academic paper by Miriam Schwartz-Ziv (highlighted in this blog post by Jim McRitchie) studies the ways companies limit shareholder voice during annual meetings — including prohibiting shareholders from presenting their own questions, ignoring some questions submitted by shareholders or limiting questions to the subject matter of the proposals being voted on — and assesses whether the meeting format and the use of those methods affect trading in the company’s stock following the meeting. Here are key findings from the paper:

– These methods appear to be used strategically. They are more likely to be implemented when director or proposal support is low.

– Companies are more likely to limit shareholder voice in VSMs.

– VSMs result in less post-meeting absolute abnormal returns, trading volume, volatility, and tweet activity. When management addresses more questions, stock prices are more likely to move and investor consensus increases.

– Shareholders continue to be concerned about their voice being limited at VSMs.

The study also reported on the types of questions companies choose to ignore during VSMs. Those questions are only seen by the public, so the author collected the questions (all 767 of them!) John Chevedden and James McRitchie submitted to VSMs between March 20, 2020 and June 30, 2021. She found that companies that chose to answer these questions addressed 183% more questions on average than companies that did not. (That percentage sounds wild, but keep in mind that this represents an average of 3.24 additional questions.) In terms of subject matter, the paper reports:

Firms are particularly reluctant to answer questions that reveal information enabling investors to gauge shareholder involvement/ indications of criticism at the meeting [. . .] Second least-likely topic to be addressed was questions related to “Vote outcomes”, with only 22% of these questions receiving a response. The fourth least-likely category was questions regarding the number of “Shareholders in attendance”, addressed in just 28% of cases. These findings suggest that companies are least transparent and forthcoming on topics that would provide insight into shareholder participation and criticism at meetings.

On CorpGov.net, Jim McRitchie adds his own input to the paper’s policy suggestions and shares a wish list of annual meeting reforms, many of which (including hybrid meetings, recordings & transcripts, question transparency & responsiveness) are consistent with the best practices promoted by Carl and Peder Hagberg. If implementing annual meeting best practices improves your company’s market performance following the meeting, there’s another reason it might be worth revisiting these practices!

– Meredith Ervine