More AGMs go virtually undetected

We'd noted recently that some companies, e.g., Wells Fargo (WFC), have decided against holding annual shareholder meetings in their hometowns, in some instances, perhaps, to withhold the venue for local protesters to express long-standing grievances with said companies.  On the other hand, each year Berkshire Hathaway enthusiastically attracts tens of thousands of shareholders, and other curious people, to its annual meeting in Omaha, Nebraska, which has come to be known as "Woodstock for Capitalists".  Other companies, however, are increasingly doing away with "physical" annual meetings altogether.

Holding its meeting blocks from headquarters, Amazon (AMZN) attracted no fewer than four protests.  Pilots for Amazon's Prime Air contends the company's air transport vendor is not competitive with compensation causing pilots to leave; they want the company to pressure Atlas Air to make changes in order to retain staff.  Mercy For Animals confronted Amazon shareholders with graphic images of animal abuse obtained during an undercover investigation at an Amazon foie gras supplier. The group introduced a shareholder proposal requiring the company to use sustainability in executive compensation decisions, which was soundly defeated.

With a plane flying overhead trailing a banner reading "AMAZON STOP FUNDING HATE. DROP BREITBART.", an amalgam of groups, which delivered a petition with over 1 million signatures, demanded that Amazon to cut ties with sponsor Breitbart News.  Last but not least, SEIU6 plus a coalition of labor, community, and faith groups held a “People's Shareholder Meeting” to urge Amazon to “help ensure a just and sustainable future for all."  High-profile Seattle City Councilmember Kshama Sawant spoke at the gathering.

On the other hand, earlier this month Charlotte-based Duke Energy (DUK) conducted its annual meeting as a virtual event for the first time in the company’s history.  The company explained the change as an effort to make the meeting more accessible for its 1 million shareholders residing in 30 countries.  Of course, in contrast to previous annual assemblies, the 2017 meeting's format did not provide the avenue for a highly-publicized anti-coal protest.  The Charlotte Observer noted that DUK AGMs had become "increasingly riotous affairs in recent years."

Duke Energy is not the first major company to hold a virtual annual meeting.  That distinction belongs to Intel Corporation (INTC), the Santa Clara, CA-based semiconductor maker, which in 2009 had a physical meeting with the option to participate virtually.  Broadridge Financial Solutions Inc., the dominant provider of virtual shareholder meeting technology, assisted the company, which last year went fully virtual.  Last year, Broadridge assisted 187 companies in holding virtual shareholder meetings, up from 28 companies in 2010.

Smaller companies are also getting in on the online act.  In 2016, for the first time, SurModics (SRDX), a provider of surface modification and in vitro diagnostic technologies to the healthcare industry, conducted a virtual annual meeting, which the company's board chairwoman, Susan Knight, said during this year’s meeting in February that the company expects to do from here on out.

“Quite frankly, it’s more of a social gathering than anything else,” said Andy LaFrence, chief financial officer and vice president of finance for SurModics.  Since only four shareholders reportedly showed up at the 2015 meeting, it must not have been a very lively event.  More than 90 percent of SurModics shareholders are institutions, he said. “The majority of them are going to be on the coasts,” LaFrence said. “This gives those shareholders an opportunity to participate and to vote live with the tools in place.”

Other motives have been posited for choosing virtual meetings.  “Transitioning to a virtual-only meeting allows Duke to fully control the content,” Natasha Lamb, managing partner and director of equity research and shareholder engagement at Arjuna Capital, told ThinkProgress. “One has to assume that any questions that are brought forward in a virtual format would be pre-screened.”

“We respectfully urge the board to take a ‘hybrid’ approach giving Duke Energy shareholders the option to either attend the meeting online or in-person,” Kenneth Bertsch, executive director of the Council of Institutional Investors, wrote in a letter to the company.

But earlier this year the Securities and Exchange Commission indicated that would not stand in the way of companies electing the "virtual-only" option for annual meetings.  Late last year, the SEC's Division of Corporate Finance, responding to a Hewlett Packard Enterprise Co. (HPE) letter about John Chevedden and Bartlett Naylor's shareholder proposal, wrote that "[t]here appears to be some basis for your view that HP may exclude the proposal under rule 14a-8(i)(7), as relating to HP's ordinary business operations" because the proposal “relates to the determination of whether to hold annual meetings in person.”  Previously, SEC staff agreed that HP could exclude on procedural grounds.

With the SEC's stance on the matter clarified, regardless whether the reality is that AGM attendees are too many, too few, too inquisitive or too boisterous, look for the movement to virtual meetings to pick up speed next season.

Robert Stead