In case you missed it, we discussed virtual annual meetings at our recent Public Company Town Hall Webinar: Securities Law Guidance for First Quarter Reporting Season. Access the recording here.
Among the numerous considerations related to upcoming annual stockholder meetings being hosted solely using remote (virtual) communication as a result of the novel coronavirus (COVID-19) pandemic, one question that several clients and colleagues have raised is whether management must host a “live” question and answer (Q&A) session on the webcast or whether stockholders must submit their questions in advance (i.e., no “real-time” submission of questions at the meeting).
Based on our survey of company practices in the Fortune 100 (as discussed further below), most companies in our survey are allowing shareholders to ask questions during the virtual annual meeting, with 58% permitting stockholders to submit questions only during the virtual annual meeting and another 32% also permitting stockholders to submit questions in advance of the virtual annual meeting.
Criteria for Survey
To assess emerging practices for Q&A at virtual meetings, particularly whether there was any divergence from “live” Q&A given the current macroeconomic environment, we surveyed Fortune 100 public companies who filed their Proxy Statement after March 1 (including those opting for a virtual meeting after their definitive proxy statement filing). The surveyed companies are primarily holding virtual-only meetings, however, several are still scheduled to hold in-person meetings and reserve the right to change to a virtual format due to COVID-19. We anticipate that many of these companies will choose to switch to virtual-only meetings—per ISS, as of April 15, 1,015 public companies are holding virtual meetings this proxy season, compared to just 286 companies in 2019.
We did not survey companies who filed their proxy statements earlier than March 2020 (and have not filed supplemental proxy materials opting to hold a virtual-only meeting) on the premise that the Q&A practices for virtual meetings may have evolved from earlier in proxy season as the COVID-19 pandemic has persisted and a company’s circumstances may change daily. This post also does not address instances where a stockholder proponent is presenting a Rule 14a-8 proposal at the meeting.
Survey Results and Notable Practices
Of the 47 companies meeting the criteria outlined above, we note the following results:
- 6% are permitting stockholders to submit questions only in advance.
- 58% are permitting stockholders to submit questions only at the meeting.
- 32% are permitting stockholders to submit questions both in advance and at the meeting.
- 4% do not clearly address their Q&A in the proxy materials and we cannot determine the style of Q&A.
Of the surveyed companies, only a handful diverged from the majority practice or took innovative approaches to Q&A.
- One company chose to limit in-person attendance to its chairman and CEO, vice chairman and a few employees who will deliver proxy votes. Additionally, the company indicated the possibility that one or more financial journalists listed in the company’s annual report will be present to ask questions previously submitted to them via email by stockholders. From the questions submitted, each journalist will choose 10 questions that he or she believes to be the most interesting and important.
- Two companies are not permitting live Q&A. One of these companies is requiring stockholders to submit their questions up to three days in advance, and the other company is requiring its stockholders to submit their questions in advance only through a portal on the investor relations section of the company’s website.
Practical Considerations for Public Companies
Our survey indicates that an overwhelming majority of large-cap companies will allow stockholders to ask questions during the meeting, not just in advance of the meeting. While practice varies by company, the survey shows that questions are usually permitted both in advance and during the annual meeting, and solicited through various media, including by email, via a dedicated website, and live Q&A with management Based on anecdotal evidence, most companies appear to be taking advantage of an electronic Q&A submission function, common with virtual meetings hosted by Computershare, Broadridge or other service providers. A small minority—just three companies of those that we surveyed—are limiting the ability of stockholders to ask questions by requiring such questions to be submitted in advance. Therefore, it appears that most companies are constructing a virtual meeting framework that provides a similar opportunity for dialogue with management as experienced at an in-person meeting.
The proxy advisory firms ISS and Glass Lewis have also weighed in on the conduct of virtual annual meetings. With respect to virtual stockholder meetings, ISS’ viewpoint is that “shareholders with a meaningful opportunity to participate fully in the meeting, including the ability to engage in dialogue with and ask questions of directors and senior management” and Glass Lewis’ policy requires that stockholders “be afforded the same rights and opportunities to participate as they would at an in-person meeting” including “the ability of shareholders to ask questions during the meeting.” Therefore, companies run the risk of ISS and Glass Lewis recommending a vote against members of a company’s governance committee where the company is hosting a virtual-only stockholder meeting and a stockholder’s ability to participate is significantly curtailed, for example by eliminating or substantially reducing Q&A opportunities.
If you have any questions regarding virtual stockholder meetings or other issues related to the impact of COVID-19 on your business, please feel free to email the authors directly or, if applicable, contact your primary Bass, Berry & Sims relationship attorney.
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