Due to the COVID-19 pandemic, many companies are holding their annual stockholder meetings through either virtual or remote channels of communication (“virtual meeting”). Of those companies holding virtual meetings, a large number are doing so for the first time. Companies with virtual meetings scheduled for later this month or next month should consider the following as they prepare.
Before the Meeting
Many stockholders are also participating in a virtual meeting for the first time this year. In fact, the virtual format is likely to attract stockholders who have never previously attended an in-person annual stockholder meeting (“in-person meeting”). This means that both companies and stockholders need to be prepared for any technology issues that may arise, such as trouble entering the meeting, asking a question before or during the meeting, or voting during the meeting.
As part of preparations, companies should reach out to their virtual meeting platform provider to discuss any technology issues that the provider has experienced during prior virtual meetings this proxy season. It is important that companies understand what technology issues they may face with respect to the virtual meeting platform so those issues can be prepared for in advance and either avoided or handled as seamlessly as possible. Companies should also make sure that stockholders can easily find where to go for technical help before and during the meeting.
Also, in the event of a worst case scenario where technology fails to the point that the meeting cannot proceed, companies should understand in advance the process for postponing the meeting to a later date and time in accordance with their bylaws and applicable corporate law.
Be sure directors know that they are required to attend the meeting virtually. In addition, coordinate with them regarding how they will be individually introduced and how they should briefly acknowledge their attendance.
Coordinate with the company’s independent auditors regarding virtual attendance and their brief acknowledgement and willingness to respond to questions.
Be sure the inspector of elections is fully plugged in and that there will be no glitches with promptly and accurately counting votes or reporting results, whether preliminarily during the meeting or definitively afterwards.
Have a smooth process in place for selecting and answering questions asked before or during the meeting. Be prepared to respond to questions regarding why the company chose its particular Q&A process, including whether and how stockholder questions and the company’s answers will be made available afterward.
Also, because stockholders should be encouraged to sign in early to be sure they are present for the entire meeting, consider having something more interesting than elevator music to hold their attention while they are waiting for the meeting to start. Consider visual or audio information about the company and its recent (previously disclosed) successes.
During the Meeting
Section 211 of the Delaware General Corporation Law requires corporations holding a virtual meeting to “implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings” (emphasis added). Additionally, while the NYSE and Nasdaq require companies listed on their exchanges to hold annual stockholder meetings, neither has any rules regarding the format of the meeting; however, Nasdaq does require its listed companies to allow stockholders to discuss company affairs with management.
In a May 3 letter to the Securities and Exchange Commissions’ Investor Advisory Committee, the Council of Institutional Investors discussed issues they have heard stockholders have faced when trying to participate in recent virtual meetings. The difficulties identified included stockholders not being able to ask questions during the meeting (for example, questions during the meeting were limited to written questions submitted in advance of the meeting) and a lack of transparency on stockholder questions (raising concerns of companies being able to choose which questions to answer). The SEC Investment Advisory Committee discussed some of these concerns during its May 4 meeting and noted that the objective of a virtual meeting should be to replicate an in-person meeting as closely as possible. The committee also noted that state law often requires the same process for a virtual meeting as an in-person meeting and that companies should be reminded of those state law obligations. Even so, the committee expressed optimism that a virtual format could be used to expand participation by stockholders.
In short, companies should try to make the virtual meeting experience as close as possible to that of an in-person meeting. Companies should put forth their best efforts to provide a reasonable opportunity for stockholders to participate in the meeting.
Have Meeting Materials and Stockholder List Available
During an in-person meeting, stockholders in attendance are usually provided with any information that may be needed during the meeting, including a copy of the agenda, meeting conduct rules, and proxy materials. Companies should make sure that stockholders are able to access these same materials through the virtual meeting platform. Additionally, Delaware companies holding a virtual meeting are required by Section 219 of the Delaware General Corporation Law to have the list of stockholders entitled to vote at the meeting “open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.”
Companies should coordinate with their transfer agent to obtain the stockholder list and with the virtual meeting platform provider to make sure the stockholder list is open to examination during the meeting. For example, companies may choose to provide registered stockholders with a link to a specified page on their website.
Companies that are not incorporated in Delaware should make sure to review their state law requirements with respect to stockholder lists, as requirements vary from state to state.
After the Meeting
Upon completion of the virtual meeting, a company should hold debriefing sessions to discuss what worked well and what can be improved upon for next year’s meeting. Companies should hold these meetings with each of their several stakeholders, including the employees who organized the meeting, the virtual meeting platform provider, and any stockholders who the company may reach out to as part of its stockholder engagement program.
While many companies are holding virtual annual stockholder meetings this year solely due to the COVID-19 pandemic, companies may decide to hold virtual annual stockholder meetings in the future depending on how this year’s meeting compares to prior years’ in-person meetings. Moreover, how virtual meetings are overall received this year may dictate whether stockholders would be open to holding future meetings in a virtual format. Companies should use these debriefing sessions to prepare for the possibility of holding either an in-person or virtual meeting next year, or perhaps a hybrid meeting.
Given the significant increase in virtual meetings this proxy season and the number of meetings still yet to be held, the considerations for companies planning a virtual meeting will continue to evolve. Companies should remain mindful of any new or proposed governmental legislation or orders with respect to holding their virtual meeting, as well as any information that can be gleaned from the experience of other companies that have already held their virtual meeting this year.