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An Update on Virtual Shareholder Meetings

A Great Thing, But Look Carefully Before You Leap

We love Virtual Shareholder Meetings. They make it easier and a lot less expensive for Directors, key employees and shareholders of every description to “attend” from anywhere in the world - or to visit the meeting later if they’d like, over the Internet. They can save significant sums on the costs of booking a meeting hall, installing proper A-V equipment, hiring security and staffing up to vet and admit attendees, who generally, are attending fewer and fewer shareholder meetings each year.. And, maybe best of all, in our book, VSMs create a complete and permanent record of the proceedings, which most companies make available on the web for a year or more.

We are OK with “Virtual-Only Meetings” too - as long as they have not been designed to “hide from shareholders” - or to evade or stifle discussion of potentially controversial issues. When there are no controversial issues on the ballot - or in the press - and where few if any shareholders have historically attended - they can cut meeting costs dramatically. And actually, we fear that if all Virtual-Only Meetings are banned - or will generate retaliatory actions, as some activists have been threatening - the move to adopt any kind of Virtual Meeting may fall by the wayside, which would not be a good thing. Many meetings of shareholders - particularly at small-cap and newly public companies - and at companies of all sixes where there is “nothing much new or controversial” - are over in five minutes or less these days!

But if you have been paying attention to the VSM scene, you will know that Virtual-Only meetings - where no in-person attendance is permitted - have come under attack from the Council of Institutional Investors, the Comptroller of the City of New York - who says the City pension funds will vote against directors at companies with Virtual-Only meetings - and the normally gentle Sisters of St Francis of Philadelphia - plus gadflies John Chevedden and James McRitchie, who plan to introduce shareholder proposals to thwart the movement. So far this year, a number of companies that held Virtual-Only meetings last year - like Conoco Phillips and Union Pacific - have agreed to revert to in-person meetings, with more companies likely to do the same later this year.

Very good things have come out of this debate however: Broadridge Financial Solutions, which facilitates most of the VSMs - and which is the only entity that can facilitate truly Virtual meetings, which require a way for all shareholders to cast their votes online - has been sponsoring an Advisory Committee of institutional investors and advisors, public company representatives and shareholder meeting and proxy voting experts, where your editor is pleased and proud to have played a part: The mission; to develop written Principles and Best Practices for Electronic Meetings of Shareholders, the latest version of which will be out within a few weeks.

The discussion, and the guidelines themselves, provide a robust, and very rigorous set of Principles and Best Practices that are Best Practices at all kinds of shareholder meetings - virtual and otherwise. Most important, they provide a long list of things to consider - and to do - and not to do - at any shareholder meeting. They can be found by going to [insert link when available]

The OPTIMIZER believes that a so-called Hybrid Virtual Meeting - where shareholders can attend virtually, or in person, as they choose - and will be able to access the proceedings for at least a year - is the gold-standard for shareholder meetings. Ultimately, we believe that they will become standard practice for all shareholder meetings.

Many companies seem to be put off by what they see as potentially added costs of producing a first-class Virtual Meeting. But, as a very frequent meeting attendee, your editor has been amazed by how many companies are video-taping the meeting now - and transmitting it over the Internet in real-time - without calling it a “Virtual Meeting.” Compared to the cost of hiring an old-time Court Stenographer - and to the old-time practice of mailing out “Post Meeting Reports” - and the costs of flying officers and directors around the country, and often now, around the world - and housing them - and feeding everyone - the costs to produce a VSM are often peanuts, we say…and produce a far bigger and better “bang” for the dollars spent.

Two last cautions in terms of ‘looking before leaping’: Broadridge, very prudently, will not host a Virtual-Only meeting if there is a proxy contest…Also - and make no mistake about it - a company would be very unwise to host a Virtual-Only meeting if there are closely contested matters on the agenda or “investor issues” in the air, or worse, in the press. Howls of protest and bad press will ensue, we guarantee. We also guarantee that one day, folks with a bone to pick will “network” with like-minded voters - and will spring a total surprise - with votes submitted via the Internet that will totally overturn a company-expected win.