During the infamous spring of 2020, the U.S. annual shareholder meetings seasons opened up right as concerns about the coronavirus peaked, coinciding with government-imposed lockdowns and shelter-in-place orders. Executives of publicly-listed corporations had to scramble to rethink how to conduct some of the most important events on their calendars. In so doing, they dramatically accelerated a new trend toward virtual shareholder meetings:

  • According to a tally kept by PricewaterhouseCoopers, 2020 has seen a 500% increase in remote meetings compared to year ago.
  • Data from MyLogIQ tells a similar story: from January to August 2020, 87% of companies in the S&P 500 conducted their shareholder meetings virtually, compared to just 23% of companies that did the same in 2019.

While the numbers skyrocketed out of necessity, virtual meetings are not likely going away anytime soon, even when the pandemic fully resolves. Thanks in part to the availability of applications such as Skype and Zoom, corporations have been able to cut their costs and preparation time for these meetings significantly. And, more stakeholders have been able to attend. Benefits like these have both groups interested in staying the virtual course in 2021.

Corporations have to up their game to keep investors engaged.

The technological advancements that have made virtual meetings possible for so many businesses did not come without their risks and hiccups. As anyonewho felt frustrated by a technical glitch, hasty Q&A session, or being muted during one of this year’s presentations knows too well, issues with equipment and application functionality can quickly transform a virtual event into a real nightmare.   

In July, the Council of Institutional Investors and other advocacy groups sent a letter to the SEC complaining about the biggest challenges with the second quarter’s virtual meetings and voicing concerns over the poor precedents being sent. They asked the SEC to urge companies to be more transparent about the process going forward.

Here are the top three concerns cited along with some steps companies can take to improve their online meeting performance in 2021.

  1. Technical Glitches: Don’t make the same mistakes twice.
    • According to the PwC study, Virtual Shareholder Meetings – Lessons Learned From 2020, some companies reported technical glitches negatively impacting the shareholder meeting. Examples of these issues included problems with joining or authentication during the log-in phase, or decreased ability to ask questions. The sheer number of people trying to join the meetings only exacerbated the problems. The fact that meetings were often switched to the virtual format in a hasty manner did not help, either.
    • Fortunately, companies have plenty of time to get things right for 2021. They can start by disclosing the type of meeting they plan to hold before the proxy statement is finalized. Next, the Best Practice Committee for Shareowner Participation in Virtual Meetings suggests that companies make sure “technology can keep up with the expected volume of meeting attendees and ensure that technical support is available for remote participants.” In addition, the committee recommends soliciting feedback from participants after the meeting to address specific problems and find areas for improvement.
    • In other words, if you had any technology issues with your meetings this year, now is the time to find a solution and make sure you do not have a repeat of the very same problems in 2021. If and when tech troubles do rear their heads, have the resources you need prepared to resolve them quickly. You should also consider how you will survey participants after upcoming virtual meetings to gauge your improvement from last year and to identify any areas that might still need some tweaking going forward.  Remember, you are probably in this at least for the foreseeable future.
  2. Q&A Sessions: Make sure your shareholders have a voice.
    • In 2020, many companies had to learn how to manage Q&A sessions in the virtual format for the first time. Several media outlets reported shareholders’ frustrations, sharing that many attendees felt they did not receive enough time to ask questions. Some investors said they were simply muted during meetings.
    • Part of the problem could be the time allotted for the meetings. A study conducted by the Hebrew University of Jerusalem, which evaluated 90 annual shareholder meetings held in 2019, indicates that the average remote meeting for S&P 500 firms lasted an average of 32 minutes, seven minutes shorter than the average in-person meeting for the same period. A similar study conducted by PwC shows the average time for virtual meetings was 34 minutes for agendas with shareholder proposals, and just 18 minutes for agendas without the proposals. With some companies limiting the number of questions to one per shareholder this year, some shareholders understandably felt slighted.
    • To avoid these negative feelings, take another page (or two) out of the Best Practice Committee’s book and give your shareholders the chance to submit their questions well in advance of your meeting date. To be fair, you should also have mechanisms during the virtual meeting for investors to have equal access to the meeting and time for questioning. One way to achieve this is to adopt formal rules of conduct to govern your meeting. In these rules, lay out exactly how you will queue questions received virtually versus in person.
    • Then, make sure shareholders are aware of the rules. They should know, well in advance, the time limits for questions and comments. Finally, make all questions and answers available online and consider including a recording of the entire meeting for investors to refer to later.
  3. Legal Issues: Dust off those bylaws and get set for a virtual future.
    • Generally, companies’ governing documents specify how shareholder meetings should be conducted. At firms with outdated bylaws and constitutions, where there is no mention of the virtual format, this could present a problem. The documents have to be amended to allow this alternative method.
    • For many companies, there may be a need to summon shareholders and approve amendments on the governing documents to make virtual meetings a valid option. So, better to start this process sooner than later.
    • It is also important to note that the ability to hold remote meetings varies according to a company’s state of incorporation. “Delaware, for example, generally allows companies to hold all-virtual meetings; other states, such as New York, allowed virtual-only meetings this year by executive order, but it is unclear whether those statutes will be made permanent,” Miriam Cross, bank and fintech reporter for American Banker.
    • Make sure you are staying on top of the rules in your state and plan accordingly. The last thing you want is to scramble to make adjustments and risk frustrating investors (again) with last-minute changes.

The grace period is over. Given the unprecedented events of 2020, many investors were willing to overlook, or at least excuse, virtual meeting hiccups last meetings season. They are unlikely to extend the same patience this time around. With remote meetings becoming the standard rather than the exception for many, it’s critical for corporations to do what is necessary to make these online events as insightful, engaging, and rewarding as possible for all involved. Overcoming 2020’s biggest pitfalls is a good place to start ensuring your 2021 meetings are some of the best on the virtual Street.