Despite the many good things your editor, and other managers and consumers of Virtual Meetings have to say about them, they’ve been coming under heavy fire of late.
Activist Tim Smith of Walden Asset Management has presented Intel, Broadridge Financial Solutions and Proctor & Gamble with drafts of shareholder proposals he has folks ready to file if they proceed with “totally virtual” meetings. Even though these three companies are widely regarded for their good corporate governance programs, Smith fears that other companies, who are NOT so good, will use VMs to “hide” from public scrutiny…and, as he told your editor, will consign ordinary shareholders, and the activist investors among them, to a “cyber-ghetto.”
P&G, signed a 5-year standstill agreement with members of a P&G founding-family once they saw the proposed proposal – though we ourselves could hardly imagine P&G successfully holding such a meeting under any circumstances, since they’d kill a cherished Cincinnati tradition and rile all their friends, neighbors, and consumers too, for no good purpose.
Intel, which would still LOVE to hold a virtual-only meeting, we think, has backed away, at least for now…but Broadridge says they’ll forge ahead with a second virtualonly meeting in 2011.
Meanwhile, CalPERS and CalSTERS have gone on record as being totally against virtual-only meetings, and a bunch of activist investor websites (some of which we think have been launched primarily as “trolling opportunities” for sales of future banner-ads) have jumped on the bandwagon, looking to send virtual-only meetings to perdition.
Quickly jumping on the anti-VM bandwagon, NY Times columnist Gretchen Morgenson posted a lengthy rant in her Sunday, Sept. 28 column entitled “Fair Game” that focused on the recent Symantec Corporation virtual meeting; asserting in the headline that “Questions, And Directors [were] Lost in the Ether”…following a 9/27 story by reporter Ross Kerber of Reuters on the Symantec meeting headlined “Shareholder meetings via Web mute dissident voices.”
Then, despite our own belief that Symantec had done a mostly fine job with their meeting, they agreed to hold a “hybrid meeting” next year…which may turn out to be the only way a Fortune 500 company can go-virtual anymore.
So let’s take a few minutes to review some of the benefits of Virtual Meetings – then to try to debunk some of the objections to them that seem clearly misguided from our perspective – and then to address a few issues that do indeed need to be addressed…all of which CAN be addressed to the total satisfaction of investors – both the activists and us ordinary folk, we believe – who, as mentioned, foot the bills for shareholder meetings:
Here are some of the things we really like about Virtual Shareholder Meetings:
- At 90%+ of the roughly 13,800 Annual and Special Meetings of Shareholders that are expected to be held this year, there is absolutely no good reason for investors to attend…except maybe they live nearby… and think there will be free breakfast. Typically, over 99% of the votes that will actually be cast at such meetings have been cast and counted the night before – and there are no “voting issues” or “performance issues” whatsoever from an investor’s perspective. Thus, a “virtual only meeting” can be a huge money-saver for corporations… when such circumstances prevail.
- Having virtual voting capability – right up until the time the polls officially close – is actually a governance improvement vs. having a physical location only, for the overwhelming majority of shareholders who can’t possibly show up to vote or change their vote in person.
- More importantly, virtual meetings provide public companies with a very cost-effective way to reach out to the many investors who do NOT live nearby, or who do not have the time or budget to attend a shareholder meeting in person…or who may be employees, or customers, or suppliers, or prospective investors, who may want to gain a bit of perspective about the company. As recent statistics on VMs confirm, companies that have held virtual meetings to date cite attendance figures that are two to three to seven or more times the numbers of people who typically attended live meetings. And most have seen modest but welcome improvements in the number of people who actually cast votes.
- The biggest and best innovation here, we think, many of the companies that have conducted virtual meetings to date have established web-based investor forums that are open to receive and to post investor questions – and answers – for 20-30 days before the meeting. Clearly, this has the potential to create a dialogue that is much more robust than the dialogue that takes place these days at most of those 13,000+ in-person meetings. It also alerts the management team to issues they may not have been aware of otherwise, and it gives both sides significant new opportunities to prepare their Qs & As with added care.
- Another very nice good governance feature, the proceedings are typically archived for at least a year, so investors who miss the actual meeting, or who want to check out exactly what was said (as we did after reading the Morgenson column) can do so for themselves…and can usually scroll back and forth to hear the fine points over and over again if they wish.
- As someone who has attended 10 or more shareholder meetings a year for 40 years now, your editor feels obliged to note that he greatly appreciates the carefully scripted and businesslike conduct of the “business part” of the meeting, which a “virtual meeting” forces companies to have. And most meeting attendees appreciate this too. Meeting-goers generally do NOT appreciate the fuzzy-logic, the rambling comments and the often un-businesslike antics of so many meeting gadflies – who tend to waste the time of normal attendees, and to make a mockery of the real business of a shareholder meeting. And sometimes the behaviors of people who come to the meeting specifically to disrupt it or co-opt it or to attract the attention of the media create potentially dangerous crowd-control issues…we’ve had many scary meeting moments.
Here are some areas where we feel the activist investors are totally missing the boat:
- Virtual Meetings – when properly conducted, that is – provide activist investors with unprecedented opportunities to present their viewpoints…and to present them to an infinitely larger audience than they could ever hope to reach in person.
- Activist investors actually tend to benefit significantly from being able to present their own case in a controlled and well-scripted manner – whether by reading their statement or, if they are reasonably telegenic, presenting it as part of a live or pre-recorded video-cast. (Here, your editor also feels obliged to note that in his long experience, most activists – and especially those pesky “gadflies” – tend to LOSE VOTES after making their case in person… But he has indeed witnessed cases where well-prepared activists DID influence the outcomes in their favor, to some degree, or sometimes set the table for a bigger and better campaign next year.
- The idea that virtual-only meetings provide an opportunity for companies to “hide” from investors is laughably and very demonstrably wrong – witness the recent flap over the Symantec VM. Let’s start with the fact that VMs must be announced well in advance, and are broadcast to a potentially infinite number of listeners. Remember too that all the VMs that we’re aware of have been archived on the web, where they are readily reviewable for at least a year. And, as we tried to convince our friend and valued colleague Tim Smith – who, by the way, is a very skilled and powerful presenter of shareholder proposals – perceived shortcomings, and especially any abuses that may occur are discovered in a flash…And they can and will be widely circulated and discussed both in the press and in cyberspace. Thus, from our perspective, VMs have a built-in and very powerful “self-correcting feature” if shareholders, or any other observers for that matter, feel that disclosures, or discussion, or the conduct of the meeting itself were to be deemed wanting.
Here, we say, is the one big issue with Virtual Meetings that needs to be resolved:
- We totally agree with Tim Smith that sometimes, investors need to confront the management team in person…to observe the way they respond – or not – to a direct challenge. We ourselves have made many wise investment and disinvestment decisions based on an up-close and personal look at the way management, and directors too, react under pressure.
And here, we say, is a reasonable way to resolve the issue, recognizing that the number of Shareholder Meetings where there are “issues” is a very small one; probably no more that 250 meetings a year, out of the 13,800-odd meetings that are projected for 2010…
- Taking a leaf from the way the Maryland legislature authorized “virtual meetings” we say that if even one shareholder of record asks to be present in person at a shareholder meeting, that shareholder, and any others of like mind, must be accommodated.
- Naturally, there must be a reasonable “notice period” for such requests…and we would suggest that 11 business days prior to the scheduled date is both a “reasonable period”, and one that would allow companies to disseminate the new information – over the web, and even via mail if the shareholders involved should insist.
- Companies should be free to offer shareholders an open phone line to the meeting, or the opportunity to submit a pre-recorded question or statement if they wish to make one, or to offer would-be spokespeople a chance to appear via a “live video-cast” that could be beamed from anywhere the proponent wishes, should the company wish to do so. (The technology here is increasingly available, and affordable, and often would cost a lot less than the travel for many proponents.) But the company should not be obliged to do any of this; they should still be free to have wannabe shareholder attendees attend at their own expense, as at present, if they don’t like the electronic alternatives. And, there should be two very important provisos; (1) the question(s) must pertain to the business that is officially before the meeting and (2) questions should be subject, as most are now, to “reasonable limits” on the time allowed for discussion of each matter before the meeting and on the number of questions a single proponent can ask - out of respect for the valuable time of other meeting attendees.
- We think that this proposal has some valuable self-policing aspects too – as a way of preventing frivolous demands for in-person meetings – when the requestor has no real business purpose in asking – OR if the proponent fails to show up, after asking a company to go to the additional expense of renting a hall just for them: If a requestor fails to show up after asking to attend in person, they should be barred from submitting any other shareholder-meeting proposal for at least three years.
So readers, we’d like to hear your thoughts on all this: email us at cthagberg@aol.com.
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