As public companies have learned to their dismay and consternation this year, a “Virtual-Only” Meeting of Shareholders requires issuers - and the service suppliers they utilize - to give both registered and street-name holders the ability to cast their votes in “real-time” - while the meeting is in progress and until the time the polls are officially closed. This is true of every state that permits companies incorporated in their state to host a Virtual-Only Shareholder Meeting.
While most of the major service-suppliers have systems and procedures that allow registered shareholders to vote, Broadridge is the only provider that provides a relatively seamless process for street-name holders to vote online and in real-time.
To date, wannabe competitors are completely stymied where street-name holders are concerned, because brokers, banks, mutual funds and other professional “custodians” are understandably unwilling to release highly private personal information (PPI) like the names, addresses and share positions of their own customers - much less to reveal that they are customers of theirs - to providers other than Broadridge.
Aside from having a long and basically unblemished track record as a tabulating agent and strong internal and external control systems, Broadridge has written contracts with most of the major custodial institutions that regulate and legally permit them to act as the voting agent on their behalf.
Yes, there are four or five service providers that provide a “workaround” for street-name holders, but it requires them to get a Legal Proxy from Broadridge, then forward it to the service provider, then wait to receive a new “control number” they can use to dial-in and properly identify themselves and, if the stars are aligned, to cast a vote.
And there’s yet another set of hurdles for wannabe competitors to overcome: Most companies insist that street-name holders who may want to ask a question at the meeting will need to prove their eligibility to do so, which can only be done online by entering a valid control number.
Here, Dear Readers, Is The Stupidest Part Of The Requirement For Online, Real-time Voting:
Yes, we know the states had good intentions when they wrote their rules for Virtual-Only meetings, but since the mid-1960s your editor-in-chief has been attending, and monitoring and certifying meeting votes - both personally and via hundreds of employees and associates in his chain of command - where he has overseen more than 50,000 meetings in all.
In all that time, he can recall only THREE OCCASIONS where the outcomes were decided at the meeting itself - other than at official proxy fights, where both sides always “hide their cards” until the day of the meeting.
Very important to know, every institutional investor we’ve spoken with has said they would never try to vote their positions while a meeting was in progress: They want to be absolutely sure that their votes are received - and counted - in ample time…and subject to end-to-end confirmation - and definitely NOT subject to last minute Internet outages or systems glitches. And, most important to note, they study the important issues carefully…and there really is NOTHING that a company, or another investor might say or do during the meeting itself that would change their minds on truly important matters that are up for a vote. In fact, if ever there were to BE a bombshell like that at a shareholder meeting, investors would have good grounds to force a re-run.
Here Is Our Suggested Work-Around If You Want To Use A Supplier Who Can’t Solve The Control-number Issues: Have A Hybrid-Meeting, With Strong Keep-away Rules For The In-Person Component… As The Only Way To Satisfy The Real Time Voting Requirement
Let’s review the list of potentially “essential attendees” at an in-person meeting with strict and stringently defined limits on the number of people who can attend - which, please note, will very likely be limited by state and local laws re: social distancing come your meeting date:
First, one would presume, someone must “preside” over the meeting…But wait! At several of the best meetings we attended or listened in on, the Chair opened the meeting with prerecorded remarks, then conducted the Q&A period over a conference line.
All Directors are expected to attend shareholder meetings these days, unless there are truly extenuating circumstances. But there is no need at all for them to be “present” except over a conference line - which certainly takes away most ‘excuses’ for non-attendance, and works just fine.
As we’ve noted in earlier issues, the old-time tradition of having not one, but two reps from the outside accounting firm has little usefulness these days - since questions are (rather sadly) so rarely asked of them…But they too can be easily answered via a conference line…
The same thing is true for the Inspectors of Election - although there does need to be something in the game-plan - and in the script - as to how the IOE will receive any proxies or ballots that in-person attendees may present….just in case.
We suggest that the Corporate Secretary, Governance Officer or General Counsel be there in person at in-person meetings, to take charge of the “business portion” of the Meeting - and to take charge of any proxies or ballots that may be presented, scan the fronts and backs when the meeting is over and e-mail them to the IOE…And so far, note well, this is the only person who MUST be there in person - other than the “broadcast technician”…so we’re up to two people at the meeting.
There is one fairly new group to think about, and that’s the tag-team of people who are needed to read and prioritize incoming questions and tee them up to be answered (more about them lower down.) But they too can be located basically anywhere, as long as they have a phone-line to present the questions to the presiding officer or to open the phone line for preselected questioners who have provided the “subject matter” - but not necessarily the question itself - and who have demonstrated that they have a right to ask their question or make a comment.
This situation would easily allow you to select an appropriate venue, and to invite up to 23 socially-distanced and properly masked shareholders to attend your in-person meeting if they so desire - AND to legally fulfill the vexing requirement to provide real-time voting - a requirement that would otherwise come with a Virtual-Only Meeting: In effect - if you are broadcasting the meeting over the Internet - but offering an in-person-only option to vote - you will be fulfilling the letter of the law - to permit real-time voting at the meeting - because you will be hosting a “Hybrid Meeting” - as opposed to a “Virtual-Only Meeting.”
The only remaining issue to decide is how to award the coveted (?) in-person seats:
We would suggest that every shareholder proponent should be invited to attend in person - but not be required to do so to have their proposal legally introduced…and that few if any would come in person.
To be “100% pure” we would suggest that any shareholder who may WANT to present a question in person - to observe the reaction, and, we say, to ask a brief follow-up question - should be permitted to do so - and given priority, until all the legally permitted seats are spoken for - as long as the subject matter is a proper matter to raise at the meeting.
The rest of the seats (still 23, we’d bet) could be awarded on a first-come, first-served basis…or by lot.
Let’s be realistic: Do we really think that shareholders will be putting in-person attendance at Shareholder Meetings high on their to-do lists…in the midst of a still life-threatening COVID environment?
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