Virtual Shareholder Meetings: Fortifying or Felling Corporate Democracy?

By Eve Tahmincioglu

Last year, four environmental advocates were escorted from Duke Energy’s annual shareholder meeting after interrupting the utility’s CEO Lynn Good.

And that was before environmental groups rallied outside the O.J. Miller Auditorium in Charlotte — where the meeting was held on May 5, 2016 — protesting what they alleged was a cozy relationship between Good and Gov. Pat McCrory, a former Duke Energy employee. The protest included a mock wedding between the two as they donned air masks.

This year, things were much more quiet.

Why? Duke Energy opted to take its long-standing meeting completely virtual. There were no investors physically there to interrupt the CEO, who spoke to the camera during a one-hour tightly scripted talk at an undisclosed location. She answered shareholder questions that were submitted online and read to her by Michael Callahan, Duke’s vice president, investor relations.

The decision to ditch the face-to-face meeting was made to “increase our shareholders’ access to the meeting, making it easy and inexpensive for them to participate,” said Steve Young, Duke Energy executive vice president and chief financial officer, in a statement announcing the move.

But it didn’t sit well with shareholders of all sizes.

The California State Teachers’ Retirement System (CalSTRS), which owns 1.6 million shares of Duke Energy stock valued at $107 million, sent a letter to Duke prior to the meeting raising concerns about going all virtual, saying it would deny shareholders the “opportunity to interact with management and board members.”

And Jim Warren, executive director of NC WARN — a Durham nonprofit that has been highly critical of the electric utility’s practices — called the move “a deflection,” in an interview with The Charlotte Observer. NC Warn owns two Duke Energy shares and seven shares are owned by organization employees.


Flirting with virtual

Given the age of Skype and other digital technologies which allow people to connect from far-flung locales, virtual meetings have become a mainstay in Corporate America, except when it comes to one very important company gathering — the shareholder meeting.

The annual gathering is not only a legal requirement, but also an age-old demonstration of corporate democracy in motion. That said, do shareholders have to be face to face with a company’s top management and board of directors?

There are strong opinions on both sides of the virtual versus in-person debate.


Questions to ask if you’re considering going virtual


A virtual annual meeting can offer benefits to a company, but can also subject it to criticism since some institutional investors and activists view the practice as limiting management accountability to shareholders, eliminating investors’ opportunities to directly share their views with the board, and thus limiting engagement. In this landscape, some key considerations should be navigated thoughtfully to determine the best approach for a company.

When evaluating the suitability of a virtual-only annual meeting, some questions are:

  • How would a virtual meeting impact shareholder attendance and participation? Some companies, particularly smaller public companies, have sparsely attended physical meetings. Would a virtual meeting likely increase participation due to the relative ease of attending without fitting travel time into the busy proxy-season schedule?
  • Are there other benefits of a virtual approach to the company and its shareholders? For example, in addition to increased attendance and eliminating physical security risk, would virtual meeting costs be lower (e.g., with no location rental, catering or security)? Could a virtual meeting bolster the company’s corporate branding?
  • What will shareholder reaction be to a virtual format? Will the ability of shareholders to more easily attend and change votes at the last minute or more easily submit questions cause excessive unpredictability? Are there particular company circumstances, including any contentious company or shareholder proposals, contested elections or a corporate controversy that may exacerbate resistance? Engagement with key shareholders can help answer these questions.
  • How can the company mitigate risks of negative shareholder reaction? While a hybrid approach addresses investor concerns, it lessens many advantages of the virtual format, including cost savings. Virtual meeting best practices, published by institutional investors, governance organizations and other interested groups in 2012 are currently being updated. They suggest not using technology to avoid opportunities for dialogue otherwise available at an in-person meeting, but instead to adopt principles and procedures for shareholder participation creating as much transparency and interaction as possible to replicate a physical meeting-like experience. Suggestions include offering telephone access or videoconferencing to pose questions, establishing and posting in advance reasonable guidelines for questions, setting protocols for organizing and displaying questions, and archiving the meeting to make it accessible after its conclusion. The extent to which a virtual meeting aligns with suggested practices may dictate investor reaction to the format.

The answers to these questions will shed light on how to balance the benefits and risks of a virtual meeting to help reach the right conclusion for a company. While there may be some unknowns, it is certain that future company practices in adopting virtual meetings will evolve, just as the technology used in these meetings will change.

Lisa A. Fontenot is an attorney in the Palo Alto, Calif., office of Gibson, Dunn & Crutcher LLP, is the editor of A Practical Guide to SEC Proxy and Compensation Rules, was named a 2016 Woman Leader in Tech Law by The Recorder in San Francisco, and was recognized as a 2017 Woman of Influence by Silicon Valley Business Journal.


Some directors and managers say these meetings can be an expensive exercise in futility with little benefit to the company or investors. Some shareholders, especially those with smaller investments, see the meetings as a rare opportunity to confront the top brass and get unscripted answers.

Despite the differing views, virtual annual meetings are on the rise. According to research from Broadridge Financial Solutions, Inc., 155 public companies opted for virtual-only meetings last year, a steady increase that began in 2010.

“Although our technology service was provided in just 3% of shareholder meetings last year, the technology has become more accepted and adoption is on the rise,” says Cathy Conlon, Vice President of Corporate Issuer Product and Strategy at Broadridge.  “Greater numbers of companies and shareholders welcome the greater conveniences, cost savings, and enhanced communications features of virtual shareholder meetings.”

Even though there’s been an increase, the majority of corporations still opt for the in-person and hybrid models. “It’s not a tsunami,” explains Ron Schneider, Director of Corporate Governance at Donnelley Financial Solutions.

To be there or not to be there

“It’s a mixed blessing,” says Howard Brod Brownstein, the Philadelphia chapter president of the National Association of Corporate Directors and director and member of the Audit Committee of P&F Industries (NasdaqGM: PFIN). “On the one hand it makes it a lot easier for shareholders to attend.” And generally, he explains, except for really big companies, companies don’t get a huge turnout and there is no real cross section of shareholders at many in-person meetings.

On the other hand, he continues, “It’s good when shareholders are in the room with you. You get to meet them and there’s a lot of off-the-record chatter before and after.”

In the NACD’s view, says Brownstein, “The test is what’s good for the shareholders.

There’s a growing shareholder movement to derail the trend.

Earlier this year, New York City Comptroller Scott M. Stringer sent a letter to more than a dozen Standard & Poor’s 500 companies denouncing the rapid rise of the virtual-only meeting, saying he would “recommend that the New York City Pension Funds adopt a policy to vote against directors at companies that continue to hold ‘virtual-only’ meetings.”

It’s a battle that has gone on for a few years now.

Intel, Procter & Gamble, and Symantec decided to go all-virtual in 2010, but reversed their decisions following investor objections, according to an article in IR magazine

When virtual makes sense

There has been opposition and the tradition of shareholder meeting spectacles, such as Berkshire Hathaway’s annual event — known as the Woodstock of annual meetings — show no signs of waning.

But some experts believe it’s time to shelve the physical powwows, at least for some companies.

“The annual general meeting in my humble view is an exercise in ritual,” says Michael Useem, management professor and director for the Center for Leadership and Change Management at Wharton School, University of Pennsylvania. “The number of people, the faction of investors that come to these is just tiny.”

Indeed, Duke Energy’s virtual meeting was “accessible” to more than 1 million shareholders in 30 countries with its first all-virtual gathering, says Neil Nissan, spokesman for Duke.

At last year’s in-person event less than 300 people were in attendance, says Nissan, but he had no information on how many actually watched the virtual meeting.

Even so, he says, “It was very successful,” pointing out that shareholders were able to send questions ahead of time and during the webcast, and CEO Good was able to answer 14 questions chosen by Duke employees who were monitoring the shareholder portal. The remaining 42 questions were also answered after the meeting and posted to the company’s website. A total of 13 questions were asked during the 2016 meeting, he notes.

Beth Henry, who owns one share of Duke Energy, is on the board of NC WARN, and has been going to shareholder meetings for at least six years, says Good answered one of her questions on the expansion of gas plants, but she thought the new format didn’t foster true dialogue. “We could follow up before, in person, and challenge their answers,” she adds.

As for any pushback over going virtual, Nissan says, “There were some who saw and appreciated the value of going online.”

“We were able to use technology to improve communications with shareholders, make sure they all had the opportunity to participate in the meeting, and they didn’t have to travel here,” he continues.

“We spoke with a cross section of shareholders and governance teams about this change,” he adds, “and they not only understood the change, but many also supported our rationale. We also completed benchmarking research to determine how large companies with shareholders located around the world enable access for the largest audience possible and research best practices for online meetings to foster transparency.”

Some investors, however, had concerns about what they saw as a loss of physical connections and access to leadership.

“We like a hybrid of in-person plus virtual elements because you get more participation,” says CalSTRS Director of Corporate Governance Anne Sheehan.

Sheehan stresses that Duke Energy is among the most responsive companies around when it comes to shareholders, and the officials there engaged with CalSTRS to discuss concerns over the meeting change. But in the end she hopes the company reconsiders and shifts to the dual model.

Serving on a public board is “a privilege” and those who do are paid well, so expecting directors to attend a shareholder meeting once a year is a reasonable request, she continues. “I realize they make directors available at other times during the year, but once a year, all directors should sit down to talk if shareholders want to talk to you.”

Why not a virtual-physical hybrid?

When asked why Duke Energy couldn’t hold both a virtual and in-person meeting and still reach a larger number of investors, Nissan says, “We tried to devote the resources to enhance the online experience. We focused on making the online portion as great as possible.”

After the virtual meeting, he adds, Duke Energy didn’t hear negative feedback from shareholders. 

Beforehand, however, several large investors and shareholder groups pushed back on Duke’s decision, sending a message to the utility and other corporations looking to follow suit that they should reconsider virtual only.

The Council of Institutional Investors (CII), representing some of the biggest pension funds in the country, sent a letter to Duke stating:

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. Like you, we see in virtual meeting technology a compelling opportunity to broaden and enhance shareholder participation. At the same time, we feel strongly that public companies serve their best long-term interest when directors and managers avail themselves at least annually to in-person, face-to-face interaction with all shareholders, regardless of size.


The Council of Institutional Investors offers a list of shareholder dashboard must-haves for companies looking to go all-virtual but still want to keep that in-person feel:

  • An audio and video feed of all key company representatives in attendance, which includes, at minimum, the chair, the CEO, any lead/presiding director, the chairs of all key board committees and the corporate secretary.
  • Ideally all board members would be visible to shareholders participating virtually.
  • If there is no independent chair, the meeting should be chaired or co-chaired by the independent lead or presiding director.
  • Access to a continuously updated list of all shareholder questions, submitted both before and during the meeting, accompanied by clear indication of any subsequent deletion or reordering in the queue.

A comprehensive Q&A tool allowing the user to:

  • Submit a question.
  • Track its prioritization in the queue.
  • Present the question virtually, including through the use of a shareholder-provided webcam or phone, if the questioner wishes not to cede such presentation to a company representative.
  • Instructions or a link for obtaining written responses to unanswered shareholder questions, made available within 72 hours of the meeting’s conclusion.
  • An option to virtually “approach the dais” after the meeting’s formal conclusion to interact with key company attendees.
  • We note that rigid adherence to a brief meeting schedule (e.g. one hour) may cut off responses to substantive questions, raising particular concern if one general type of question appears to be favored and a pertinent line of perhaps uncomfortable questions appears to be sidelined.
  • To the extent there is significant interest in “approaching the dais” after the meeting, this feature could be managed through a transparent queue and enhanced with accommodation for shareholder-provided webcams.
  • Access to a list of registered shareholder attendees and the number of shares represented at the meeting, if viewed by the company.
  • Access to preliminary vote tallies during the meeting, if viewed by the company.


In a follow-up interview with Directors & Boards, CII’s director of research Glenn Davis reiterates this concern. “We continue to believe shareholders deserve the choice of attending their meeting in person, particularly in light of current weaknesses in virtual meeting technology,” he explains.

CII has outlined a list of must-haves if a company wants to recreate the in-person experience, including everything from having board members visible during the webcast to allowing shareholders to ask questions directly via webcam or phone without going through a screener first. “We are not aware of any virtual-only company that follows these practices,” Davis notes.

Before jumping into the virtual pool

Companies are well aware that there will be some investors who will object to eliminating face-to-face meetings and that doing so could bring negative media attention, says Donnelley’s Schneider.

He offers some things to keep in mind before going virtual:

• Think about your ownership base. If you’re a target of known activists, or if there’s a shareholder proposal that shareholders may want to discuss, understand there will be some negative pushback from those investors, publicized through social media. And you may get dinged on the vote.

• Context matters. If company performance is fine and there are no controversies brewing, that might be one environment to consider bypassing in-person meetings.

• If the perception is that a company is trying to muzzle or limit the ability of investors at the meeting to make their views heard, management and the board has to consider whether that perception is worth it.

It’s also important to look at the legalities of going virtual and whether corporate bylaws need to be amended.

“Some companies that are holding virtual meetings have had to amend their bylaws to allow for a virtual meeting,” explains Broadridge’s Conlon. “In other cases, their bylaws were non-specific on the matter of the shareholder meetings so no change is required.  Other companies have told us that they are pre-emptively changing their bylaws even though they may not have any intention of going virtual for their upcoming meeting, but they are making the change so that when they are ready, they will be able to do it.”

And there are corporate laws to consider.

The state where companies are incorporated govern shareholder meeting conduct, and statutes differ when it comes to the virtual format, according to a document developed by the law firm Norton Rose Fulbright for the Association of Corporate Counsel:

Nearly half of the states, including Delaware, California, Maryland and Texas, have statutes that permit virtual-only or hybrid shareholder meetings. However, some of these statutes impose conditions that may make virtual-only shareholder meetings impractical or unrealistic. For example, the California corporation statute requires that corporations obtain shareholders’ consent to a virtual-only shareholder meeting, and Maryland law provides that a corporation must provide a place for an in-person meeting of the shareholders if requested by a shareholder, effectively giving each shareholder a veto for any proposed virtual-only shareholder meeting.

In the end, it will be up to directors and management to make the final call.

For Duke, Nissan says the company plans to continue virtual-only annual meetings.

“We routinely have conversations with environmental groups, activists and community members to discuss their viewpoints on key topics and those that are shareholders had the opportunity to ask their questions during the meeting,” he notes. “Bottom line is that the new format removed any cost barriers for our shareholders and granted more people access to the meeting than in our previous format.” 

* Photo credit: David Boraks/WFAE-FM


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