June 09, 2010
The Virtual Lack of Virtual Shareholder Meetings
Posted by Lisa Fairfax

I am working on a paper on virtual shareholder meetings--meetings held solely by electronic communications instead of at a physical location.  Broc Romanek over at the Corporate Counsel has blogged about such meetings on several occasions.  The interesting thing about such meetings is that to date they have been relatively scarce--and it seems like they may continue in this vein at least for the near future. 

At first glance virtual meetings seem like a good idea for corporations and shareholders.  Corporations could save money by not having to host a meeting at a physical location.  At the same time, corporations could boost shareholder participation for those shareholders who would not have to incur the expense of traveling to a physical place.  But alas, in many cases corporate plans for such meetings have been met with strong opposition from shareholders who fear that an electronic-only meeting could be a convenient opportunity for corporations and directors to avoid confrontations from, or interactions with, shareholders.  Indeed, it was vigorous shareholder opposition, including threats of a withhold the vote campaign, that caused Intel to table plans this year for its first ever virtual shareholder meeting.  With respect to Intel, shareholder activists were particularly concerned because Intel was the first major corporation to announce an intention to host a virtual meeting, and hence there was concern that its meeting could represent a trend.  Instead of a virtual meeting, Intel hosted a "hybrid" meeting--one at which shareholders could participate remotely, but where there was also a physical location.  The fact is, since 2000 when Delaware enacted a statute enabling corporations to host virtual shareholder meetings, very few corporations have done so.  Indeed, according to my research, although some twenty states have followed Delaware's lead, I could only unearth about a dozen corporations that have held remote-only meetings.  Corporations seem to have decided that the benefits of the virtual meeting simply do not outweigh the risks, particularly in terms of shareholder backlash. 

So will the tide turn?  Of course, like Intel, many corporations host hybrid meetings--giving shareholders the choice about whether to participate remotely or in person.  Then too, several corporations hosted virtual meetings for the first time this year.  Moreover, the United States Proxy Exchange, the group that led the campaign against Intel, is planning a conference to address concerns associated with virtual meetings.  The group indicated a belief that virtual meetings could be beneficial so long as corporations instituted strong safeguards.  According to Broc Romanek, the Intel meeting, including the real-time voting and questions from the Internet, went smoothly.  So perhaps there is potential for progress in this area.

But thus far, it is fair to say that the virtual meeting has been a virtual bust. . .

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