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Investors Opposing Virtual Shareholder Meetings Notch WinsBy
Union Pacific, ConocoPhillips revert to in-person meetings
Shareholders say hybrids of digital and real life are best
Shareholders demanding face time with corporate boards and senior managers are starting to get their way.
Railroad operator Union Pacific Corp. will revert to an in-person annual meeting this year, after its 2017 virtual-only gathering drew a shareholder rebuke and a proposal to end the practice, a company lawyer told the Securities and Exchange Commission in a letter dated Monday. ConocoPhillips is also backpedaling after investors objected to the oil producer’s online meeting last year.
“A virtual-only meeting is a totally disembodied event online -- there’s no exchange or opportunity for investors to look the board in the eye,” said Tim Smith, a director at Boston-based Walden Asset Management who worked with shareholders of ConocoPhillips and Comcast Corp. opposed to virtual-only meetings.
About 163 U.S. companies held online-only gatherings last year, up from 122 in the 2016 season, according to a review by proxy adviser Glass Lewis & Co. While firms say digital tools cut costs and make meetings accessible to more shareholders, investors including New York City Comptroller Scott Stringer say it’s eroding their ability to hold management accountable. Stringer, who oversees $191 billion of pension assets, said last April that those funds will vote against directors at companies with virtual-only meetings.
“It’s one of the great markers of American enterprise -- whether you own one share or 1 million, you can speak at a company’s annual meeting,” Stringer said in a statement at the time.
The Council of Institutional Investors, which represents managers who oversee more than $3 trillion combined, started a campaign against virtual-only meetings last year.
ConocoPhillips’s future annual meetings “will be held in-person with internet availability,” the company said last month in a letter to the Sisters of St. Francis of Philadelphia, which objected to the online-only format.
“The board values these discussions and considered the views of these stockholders at its December meeting in making the decision to hold in-person annual stockholder meetings until it determines otherwise,” Daren Beaudo, a spokesman for the oil company, said in an emailed statement. Raquel Espinoza at Omaha, Nebraska-based Union Pacific confirmed that this year’s meeting will be in-person and said the company is evaluating whether to hold it online as well.
Broadridge Financial Solutions Inc., which processes electronic voting for companies, expects to facilitate about 250 virtual annual meetings this year, though about 1-in-5 will be hybrids where companies hold both virtual and in-person meetings. When it first started offering the tool in 2009, just four companies held virtual meetings.
Some companies hold gatherings that investors consider can’t-miss experiences. Warren Buffett’s Berkshire Hathaway Inc., for example, draws tens of thousands to Omaha each year, and the company began webcasting the event in 2016. Exxon Mobil Corp., often the target of protests, rents out the home of the Dallas Symphony Orchestra.
The move toward digitally enabled meetings underscores a change in how companies interact with shareholders. At many firms, boards and managers actually spend far more time meeting with investors one-on-one and travel around the world to do so. The routine annual shareholder meeting, by comparison, can be less fulfilling.
While investors of smaller companies may be happy enough to be served coffee and pastries, many firms say they’re often disappointed when only a small number of non-employee shareholders show up. Some investors face budget pressures of their own and can’t make it to every meeting, especially when most are bunched together between April and July.
Shareholders such as Smith of Walden Asset Management say it’s often hard to determine which annual meetings they should attend, and the need to confront management in person can shift quickly after a crisis.
“Annual meetings can be almost like a town hall where investors have a chance to ask questions, the board responds and both sides can feel they had a good experience -- sometimes the CEO or board is out there shaking hands with shareholders," Smith said. "The gold standard is a hybrid, where you allow people to come to a meeting, but also allow them to come in online.”
— With assistance by Noah Buhayar, and Thomas Black