Many have been wrangling with all the considerations of holding virtual-only or hybrid shareholder meetings during this time of “social distancing.” A Perkins Coie memo provides considerations from the West coast and this blog from Bass, Berry Sims does a nice job discussing practical considerations, including considering views of institutional investors and proxy advisors. We reached out to Amy Borrus from the Council of Institutional Investors, and she kindly provided this statement about CII’s position on virtual-only shareholder meetings:
“CII generally has opposed virtual-only shareholder meetings, in favor of a hybrid approach. Given coronavirus concerns, it is reasonable that some companies will go to virtual-only this spring. But we hope they will make it clear that this decision was one-off, and that they follow best practices for making any virtual meeting participatory.”
Meanwhile, a NYT DealBook article includes a statement from NYC Comptroller Scott Stringer:
The funds he oversees ‘will not take action against boards holding virtual-only annual meetings due to the coronavirus that disclose their rationale and affirm their commitment to holding in-person meetings in the future.’
State laws and company organizational documents may prevent some companies from holding a virtual-only shareholder meeting, but legal issues aside, virtual meetings aren’t without criticism. Among other things, some investors say the meetings don’t allow shareholders to interact with management and directors, and there are concerns that shareholders might not be able to get all questions answered, etc. This criticism has led some investors to vote against directors at companies that hold a virtual-only shareholder meeting.
Due to these concerns (and others), it’s understandable why companies might be hesitant to shift to a virtual-only meeting format, so the statements from CII and the NYC Comptroller may help some companies who’ve been wrestling with the decision about what to do.
What about ISS & Glass Lewis? At least for this year, they’re relaxing their policies. A Cleary memo covering virtual meeting considerations includes the updated guidance from ISS and Glass Lewis released by Kingsdale Advisors. Glass Lewis also has a memo on its website. Here’s an excerpt from Cleary’s memo:
– Glass Lewis: Consistent with its current 2020 proxy voting guidelines, Glass Lewis has indicated that it will continue to review an issuer’s proxy materials regarding virtual shareholder meetings. Pursuant to its 2020 guidelines, Glass Lewis will generally recommend voting against governance committee members where the board is planning to hold a virtual-only shareholder meeting and the company does not provide robust disclosure in their proxy statement assuring shareholders that they will be afforded the same rights and opportunities to participate as they would at an in-person meeting. The memo includes examples of what Glass Lewis considers “effective disclosure.”
Glass Lewis stated that, in context of coronavirus, companies that have already filed their proxy statements and provided information for an in-person meeting but are moving to a virtual-only meeting should provide public disclosure explaining the rationale. Such disclosure should specifically state that the change is due to the coronavirus outbreak, include complete information about accessing the meeting and confirm shareholders will have the same opportunities to participate – as they would have had at an in-person meeting.
– ISS: Though it has not previously adopted a formal policy on virtual shareholder meetings, ISS stated that in light of the coronavirus outbreak and the rapidly changing environment, ISS expects that institutional investors will likely be more accommodating of virtual meetings this year.
Like Glass Lewis, ISS stated that it will require companies to provide comprehensive disclosure affirming that a virtual meeting will provide full opportunities for shareholders to participate, ask questions, provide feedback to the company and present shareholder proposals. ISS also indicated that it anticipates the way in which companies manage virtual meetings this year will impact its future position on virtual shareholder meetings.
-Lynn Jokela, TheCorporateCounsel.net March 16, 2020