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Virtual Shareholder Meetings

Industry Thought-Leaders Are Working Hard To Develop Best-Practices For “Virtual Shareholder Meetings”

Way back in the year 2000, the state of Delaware, where over 50% of all US companies are incorporated – looking to stay in the forefront on shareholder meeting matters – amended its General Corporation Law to allow shareholder meetings to take place in “cyberspace.”

The revised Code allows shareholders to be considered “present in person”– as long as four conditions are met: (1) that the company can validate the identity of “attendees” (2) that the issuer takes “reasonable measures” to provide shareholders with the opportunity to “participate” in the meeting by being able to read or hear the proceedings, basically as they happen, and (3) to cast their votes from cyberspace if they wish to – essentially as if they were physically present and (4) maintains records of votes and other actions taken at the meeting. With Missouri signing on in February of this year, 22 states now permit “virtual-only meetings” although one or two have some conditions that tend to make them impractical. Another 11 states require a physical meeting location, but permit “virtual participation” and “virtual voting.” Our bet is that ultimately, every state Code will provide for virtual meetings – if only to allow for virtual participation. Why would one not?

It took about seven years for the idea to gain traction, but this season, Broadridge expects to facilitate their 100th VSM. About 60% of them will be “virtual-only” meetings, because of the big cost savings that can be generated – especially by smaller companies that experience little or no in-person attendance.

Initially, many shareholder activists, including many prominent institutional investors, resisted the VSM concept – despite the potential for them to reach an infi y wider audience for their views than they could possibly reach at an in-person meeting. But this fact – plus the inevitability of the technological march of progress – not to mention the undesirability of being perceived as Luddites, or worse, saboteurs, looking to toss their sabots into the works – has since drawn a large group of very savvy investors and investor advocates into joining a VSM Working Group – with the goal of developing a set of “Best Practices” for VSMs.

We don’t want to jinx the effort by speaking prematurely, but it seems to us that very good progress is being made – and that a very large number of the participants agree that yes, virtual meetings are inevitable…and that yes, they can and will help to increase the numbers of people who can and will “attend” – by addressing the time, cost and other considerations that make “physical attendance” impossible for so many shareholders – and that YES… the most important consideration is to be sure that all shareholders will be able to have at least the same – and ideally better opportunities for their views to be heard at VSMs – vs. in-person-only meetings.

We have been particularly impressed by the support for “reasonable time guidelines” that many of the most savvy and statesmanlike participants have voiced – but this is a very businesslike group – and many of them share the same concerns that we have long expressed here, about the way gadfl , special interest groups and out and out nut-jobs are often able to take the focus off the really important meeting issues. We predict that a robust set of “Best Practices for VSMs” will be issued for comment…very shortly.