Shareholder proposals were another aspect of last year’s virtual annual meetings that didn’t always go smoothly, and a recent blog from Soundboard Governance’s Doug Chia provides some advice to companies about what not to do when dealing with a shareholder proponent at a virtual meeting. This excerpt discusses how companies have muzzled proponents by limiting their ability to talk about their proposal:
This leads me to the stories about issuers’ placing strict substantive limits on presenting shareholder proposals at VSMs. These instances involve issuers dictating what proponents can say:
(1) Requiring the proponent to provide a very short written statement (e.g., 100 words), to be read by management at the meeting in lieu of the proponent speaking in their own voice by phone or audio recording.
(2) Requiring proponent to stick to a prepared script provided by the company, based on the proposal and supporting statement in the proxy statement.
(3) Limiting the proponent to only the exact words of the proposal and supporting statement as printed in the proxy statement… and citing the SEC rules as the source of this limitation.
The blog acknowledges that abuses like these were outliers, particularly among large cap companies. But actions like this also risk alienating investors & making the company a corporate governance poster child – and while companies may not be seeking a governance “gold star” for their virtual meetings, they also don’t want to stand out from the pack in a negative fashion.
-John Jenkins, TheCorporateCounsel.net April 29, 2021
