The Shift to a Virtual World
The COVID-19 pandemic has altered and changed many familiar corporate operational and governance practices and norms, including how issuers host their annual general meetings (AGMs). Broadridge Financial Solutions reported hosting 300 virtual meetings in 2019 and approximately 1500 virtual meetings this year thus far.
In place of in-person only AGMs, issuers have two options: (1) hybrid AGMs that provide both virtual and physical meeting platform options and (2) virtual-only AGMs implemented through electronic means such as the use of live webcasts and teleconference lines. Virtual-only AGMs have proven to be the most popular option for many issuers since the declaration of COVID-19 as a global pandemic. Many issuers' are opting for virtual-only AGMs as part of their commitment to acting in compliance with the directives from public health and government authorities for in-person gatherings and social distancing.
Not Just a Tech Issue
In addition to technical issues and platform glitches, shareholders have expressed challenges during virtual-only meetings, including access to the virtual platform based on the type of security holder they are (registered vs. beneficial), limited time allocation for Question and Answer sessions (Q&A) and the lack of transparency around the Q&A session process. Q&A sessions in shareholder meetings offer formidable moments for shareholders to clarify concerns and engage in a deeper dialogue with management. Over the course of the pandemic, some shareholders have expressed concerns that management is only responding to select questions from shareholders, which in turn, may allow issuers to sidestep dissent. Many of these challenges have left shareholders feeling muted.
As we settle into a new world of work and virtual meetings, there are several considerations to overcome barriers to shareholder meetings and benefit from the advantages of virtual meetings.
As part of an issuer's efforts to improve corporate governance, issuers may grant greater consideration to providing meaningful Q&A sessions - both in the length of time allocated and in creating thoughtful processes for soliciting and responding to questions. Glass Lewis issued several recommendations encouraging effective disclosure for the implementation of virtual-only shareholder meetings, including:
- addressing the ability of shareholders to ask questions during the meeting, including time guidelines for shareholder questions;
- setting out rules around what types of questions are allowed during Q&A sessions and how questions and comments will be recognized and disclosed to meeting participants;
- providing management's response to investor questions on the investor page of the issuer's website as soon as practical after the shareholder meeting;
- consider whether to allow shareholders to listen to meetings as guests in case they have difficulty logging in or accessing the virtual platform; and/or
- set out procedures for accessing technical support to assist in the event of any difficulties accessing the virtual meeting in proxy-related materials.
Issuers should review and revise the depth and degree of communications sent to shareholders, including instructions for submitting votes and participating in live online sessions. Shareholders, on the other hand, should participate in opportunities for feedback on the mechanics and logistics of meetings, such as the chosen method for circulating voting options or the type of webcast platform used.
It is important to note that the ability to conduct a shareholder meeting virtually is currently limited where the meeting is "contested" (for instance, where the meeting is being held pursuant to a requisition). Issuers should consult with their counsel in such circumstances to determine the best path forward.
For additional guidance and best practices on virtual shareholder meetings, visit our publication on this topic here.
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