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Outbreak driving shareholder meetings online

US and Switzerland allowing it, but advocacy groups prefer confrontation to stop firms cutting out questions

SHAREHOLDER meetings are going virtual as companies adapt their mandatory annual gatherings to Covid-19. Corporate proxy season is already underway, with companies filing annual statements ahead of thousands of planned general meetings stretching from April to July.

Most firms are required by law to hold gatherings to approve corporate policies. In recent years, meetings at companies like Exxon Mobil Corp, Wells Fargo & Co and Facebook Inc have become popular for activists urging action on climate change and social responsibility.

But the Covid-19 pandemic has changed all that. Citigroup Inc and Bank of America Corp said this week that they are considering alternative arrangements for their meetings, and Starbucks Corp will hold a virtual annual gathering on Wednesday instead of in a Seattle theatre due to "public health concerns".

"We're getting a lot of inquiries about contingency planning" due to the Covid-19 outbreak, said Chuck Callan, senior vice-president for regulatory and corporate affairs of proxy processor Broadridge Financial Solutions Inc.

Broadridge, which hosted a record number of virtual annual meetings last year, said dozens of companies are asking how to proceed.

The US Securities and Exchange Commission (SEC) said on Friday that companies will be allowed to announce in regulatory filings that they are conducting "virtual" shareholder meetings without sending out a fresh proxy statement.

Delaware law otherwise requires companies to give 10-day advanced notice if they are changing their meeting location, but the SEC said that companies can now simply issue a press release and post the information online.

And it's not just in the US. The Swiss government said on Monday that shareholders can have annual general meetings with votes by proxy.

"One of the dangers of virtual meetings is that companies can just cut out questions and not answer them." There are likely to be more regulatory moves in the coming weeks, according to Mr Callan.

Nine US states, including New York, technically require companies to hold an annual meeting in person, sometimes in addition to a virtual one. Broadridge said it hosted more than 300 online annual meetings last year, compared with just four when it launched its virtual meeting platform in 2009.

Before the pandemic, shareholder advocacy groups often pushed back against online meetings, saying that they prevent them from having face-to-face confrontations with company executives and their boards.

Shareholder activist John Chevedden asked investors last year to vote against three directors at General Motors Corp because of the company's decision to hold an online-only meeting.

The long-time activist, who regularly submits governance-related proposals calling for companies to split their chairman and CEO roles or make it easier to remove directors, often shows up to present his proposals directly to management and board members.

Mr Chevedden's suggestion didn't get enough votes to oust the directors, and GM said that the new meeting format had ultimately increased shareholder attendance to 125 from about 35 at its prior in-person meetings.

New York City Comptroller Scott Stringer, who oversees US$216 billion in pension assets, has previously threatened to vote against board members of companies that hold only online meetings.

Given the new reality of Covid-19, he says he won't act against companies that cite the virus and commit to holding future in-person meetings.

"Public health must of course be a top priority," Mr Stringer said in a statement to Bloomberg Law. Activists, in general, hope the online trend will only be temporary.

"One of the dangers of virtual meetings is that companies can just cut out questions and not answer them," said James McRitchie, a prominent shareholder activist who submits dozens of proposals a year to companies. He said he would still prefer a hybrid model, with some portion of the meeting happening in public - or as close to public as possible.

"Ideally, shareholders should be able to see and communicate with other shareholders, even at a virtual meeting," Mr McRitchie said. BLOOMBERG

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