I have been doing some research on virtual shareholder meetings—shareholder meetings conducted without a physical venue and thus solely through electronic means of communication—and I must admit to having some questions about their ultimate benefits.

Since 2000, when Delaware became the first state to allow virtual shareholder meetings, some thirty states have amended their corporate codes to allow for completely virtual meetings, shareholder participation through remote means, or some combination of both.  Corporations differ on the circumstances under which virtual shareholder meetings can take place.  For example, in some states, the only procedural requirement is that all participants be able to hear one another.  Other states, like Delaware, impose additional procedural safeguards including ensuring that there is a mechanism for identifying shareholders, and that the corporation retains a record of the proceedings.  Then too, some states allow the board , in its sole discretion, to determine whether a virtual meeting will be held, while other states appear to be more flexible on the issue of who has the ability to call such a meeting.  Finally, at least one state—Massachusetts—restricts virtual shareholder meetings to non-public companies.

This kind of restriction stems from concerns raised by shareholder activists’ groups that virtual shareholder meetings may not be appropriate for corporations with widely dispersed shares.  To be sure, proponents of such meetings argue that they may represent a way to boost shareholder participation by enabling shareholders who would not otherwise participate in a physical meeting to take part electronically.  In addition, for those companies that must pay for physical space to hold a meeting, virtual shareholder meetings also offer cost savings.  However, shareholder advocates worry that supplanting physical shareholder meetings with virtual ones would have a negative impact on shareholders.  This is because they do not allow the deliberation and face-to-face confrontation that occurs in a physical meeting.  This is particularly true for meetings that may involve contentious issues or in which there are many shareholders.  In those cases, it may be difficult to have true dialogue without a physical meeting.  In fact, shareholder advocates worry that virtual shareholder meetings may serve as a way for managers to ignore shareholder concerns.  These advocates point out that emails can be more easily ignored or down-played while it is difficult to ignore questions posed in a physical setting.  These concerns have caused some corporations to abandon plans for virtual meetings.  They also have led some scholars to recommend that the use of such meetings be restricted to smaller companies, or that such meetings only be used in combination with physical meetings, and hence not serve to supplant entirely the traditional physical shareholder meeting.

Ultimately, the fact that only a handful of companies have taken advantage of the ability to host virtual shareholder meetings suggests that most corporations are reluctant to forego physical meetings, even when the issues to be discussed at those meetings seem relatively mundane and uncontroversial.  Certainly, like with all elections, it would be nice to embrace a process that promises greater participation.  Yet our experience with voting inaccuracies in local, state, and federal elections suggest that sometimes technology promises more than it can deliver.  And this may be because sometimes there is just no substitute for human interactions. 

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