May 7, 2020
Authored by: Vicki Westerhaus, LaDawn Naegle and R. Randall Wang
Because of the rapid shift from in-person to virtual annual meetings mandated by COVID-19 health and safety concerns, many companies held first-time virtual-only meetings, with both management and shareholders exploring the process in real time. Not surprising, reports of virtual meeting glitches soon began to emerge.
Twenty minutes into the virtual-only annual meeting of Goodyear Tire & Rubber Company, shareholder John Chevedden was presenting his shareholder proposal (to allow shareholders to vote on bylaw and charter amendments) when the microphone cut out. Chevedden filed a shareholder alert with the SEC requesting that the polls be reopened so Goodyear shareholders can vote based on the full text of his proposal presentation. So far, no word from Goodyear on Chevedden’s allegation that management cut off the microphone.
Earlier this week, the Council of Institutional Investors (CII) sent to a letter to the SEC Investor Advisory Committee expressing concern about some virtual-only annual meetings early in the 2020 proxy season, citing anecdotal reports of problems including:
- Shareholders struggling to log into meetings, in part due to control number snafus;
- Inability to ask questions in some cases if the shareholder voted in advance by proxy;
- Shareholders unable to ask questions during the meeting;
- Possible cherry-picking of questions asked by shareholders and lack of transparency on questions asked by shareholders; and
- Confusion on channels for shareholder participation, with shareholder proposal proponents required to use a different line than that used for general shareholders.
The CII urged public companies to mitigate the log-in and connectivity issues by providing the ability for guests to listen to a meeting without logging in. The position of the CII is that “[p]ublic company shareholder meetings are public events and involve public disclosure, and prospective shareholders and other market participants should be able to listen.”
The CII went on to encourage the SEC to complete its rulemaking for universal proxies and also to require proxy statement disclosure for companies holding virtual annual meetings to explain how companies are complying with state law rules about shareholder ability to participate in meetings. The CII also suggested that proxy statements include an electronic address for contacting a board representative and for communications on shareholder proposals or other shareholder concerns.
In remarks at the May 4 special meeting of the Investor Advisory Committee, Commissioner Hester M. Peirce stated, “I also look forward to the hearing your observations on shareholder engagement at the virtual shareholder meetings that have been held since the pandemic began. Since state law governs much of this engagement, I hope that feedback and discussions will be focused on the touchpoints with the federal securities laws.”
Companies with virtual annual meetings still to come may want to consider some of the concerns raised by CII and coordinate with their remote meeting provider to put plans in place to address some of these recurring issues. Stay tuned for likely further SEC guidance on virtual annual meetings going forward.