Download full Board Memo 2021
As we enter 2021 the question of how to handle spring annual shareholder meetings looms large. While cases of COVID-19 continued to surge throughout the fall of 2020 and states urged people to stay home and take precautions, the promise of a vaccine came ever closer with hints that “normal” life may resume as early as Q2 of 2021, when annual meetings are being held.
What we learned in 2020 is that the virtual-only shareholder meeting model works; contested virtual meetings were successful, and nearly an entire market pivoted just as proxy season began. However, while many agree with the efficiency and accessibility benefits of virtual shareholder meetings, they are still not universally accepted by investors and other stakeholders.
With this in mind, companies considering a virtual-only meeting should consider the following.
Some investors required companies to commit to returning to in-person or hybrid meetings in order to receive favorable votes in 2020. As we move into 2021, those investors have not yet publicly stated whether they will hold companies to their commitments in the year ahead. If a company that committed to reverting to a virtual-only meeting wishes to continue with a virtual meeting in 2021, advance engagement with investors will be helpful to assess stakeholder views and provide companies a chance to explain why virtual-only shareholder meetings are appropriate.
Other investors do not favor virtual-only shareholder meeting formats but stopped short of requiring commitments and gave wide latitude to companies in 2020. Disclosure in the proxy statement about why a continued virtual-only meeting format was chosen may be persuasive to those investors.
As companies and vendors rolled out virtual meetings, some shareholders noted kinks related to meeting accessibility and opportunities for shareholder engagement and participation. Companies can expect there to be little forgiveness for these issues in 2021. It will likely be helpful for companies holding a virtual meeting in 2021 to explain how improvements are implemented.
Some states continue to prohibit virtual-only shareholder meetings and companies relied upon executive orders, some of which were last minute and vague. In these states, extensions to existing executive orders or new executive orders may be necessary in order for companies to plan a virtual-only meeting in 2021.
Time will tell whether companies can feasibly return to in-person meetings, and it is possible that there is variation based on geographic location, industry, or other considerations. As companies think about meeting formats, they should be prepared to communicate with their stakeholders, build flexibility into their plans, and be ready to pivot on short notice.
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