The pros and cons of virtual shareholder meetings
The future of shareholder meetings is virtually here, according to Computershare.
In a recently published whitepaper, the stock transfer company notes that international interest in virtual and hybrid shareholder meetings is growing, led by companies in the US.
‘We have also seen increasing facilitation of the use of hybrid and virtual meetings in legislation and in companies’ governing documents,’ it says.
It adds that these trends are not surprising given that communications are becoming increasingly digital. At the same time, there’s a trend towards reduced physical attendance at shareholder meetings. Often too, there is a rise in voting when shareholders are provided with easy-to-use digital solutions.
Computershare expects the transition to digital channels to continue on the back of increasing cross-border investment, the resulting geographic spread of investors and the growing influence of the millennial generation on digital adoption in financial services.
It states: ‘Virtual and hybrid meetings are a logical progression from digital onsite meeting services, such as use of smartphone apps that produce electronic admission “cards” to gain entrance to meetings, in place of paper admission cards, and apps used for voting in the meeting room itself.’
However, it adds: ‘If virtual meetings are to achieve broader confidence and adoption, companies need legal and regulatory certainty, and companies and investors together need to establish what constitutes best governance practice for the conduct of such meetings.’
Computershare’s whitepaper details a number of proposals on how to move towards this best practice while safeguarding the interests of companies and investors.
According to Computershare, virtual meetings offer the potential to increase shareholder participation in meetings by removing barriers of travel and costs and by offering multiple channels for remotely voting and attending the meeting (smartphones, tablets, laptops, desktops etc).
They also provide greater accessibility for physically disabled shareholders and enable institutional investors to attend more than one meeting in a day — a key consideration given that many shareholder meetings are often grouped into a tight timespan during the proxy season.
For corporates, virtual meetings can also reduce the costs of operating a meeting, including the costs of physical facilities, security requirements and personnel.
However, not having physical shareholder meetings may have some drawbacks.
For example, retail and smaller institutional investors that lack other opportunities for direct engagement have particularly valued physical attendance at shareholder meetings, says Computershare.
There is also a perception that a company potentially can avoid ‘difficult’ questions due to a lack of visibility in the online submission format. ‘This is likely exacerbated in the context of contested elections or other controversial meetings,’ observes Computershare.
And, in some cases, webcast technology can cause delays in transmission, leading to uncertainty around the timing of the Q&A and voting segments of the meeting.
‘As a result of these issues, there is some risk that, without appropriate protocols, conducting a virtual meeting could actually result in reduced participation,’ says Computershare.
It notes that these concerns have led some investor groups to take a stance against virtual meetings and, instead, support hybrid meetings to preserve the option of physical attendance.
While the benefits of virtual meetings can also be achieved through the use of hybrid meetings, Computershare observes that for many smaller companies, running a dual-channel meeting is likely to be deemed cost prohibitive.
‘Additionally, in our experience, many lower-profile companies that have had minimal or even no attendees at their physical meetings for several years saw increased shareholder participation when they switched to a virtual meeting.’