The year shareholder meetings went virtual
Converting an annual general meeting to a virtual event is more complicated than sending out a Zoom link.
The technology isn’t as straightforward. The legality varies by state. And depending on whom you ask, the shareholder experience is more opaque.
Financial institutions faced the same issues many other companies did when scrambling to reorganize their annual meetings in the spring. Like many industries, they had no choice but to move them online.
Experts estimate that a few hundred virtual shareholder meetings took place in 2019. In 2020, that number jumped into the thousands.
The ability to hold a remote meeting depends on the laws of 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’s unclear whether those statutes will be made permanent.
The technology is also more specialized than a regular webinar. Broadridge and Computershare, two major providers of virtual annual meetings, validate shareholder logins and ensure that voting is secure.
Now that an unusual season has concluded, reflecting on what worked well and what didn’t can inform the decisions banks make in the future, whether that means returning to the traditional model when it is safe, sticking with virtual events or experimenting with a blend of the two. Discover Financial Services in Riverwoods, Ill., and Bank First in Manitowoc, Wis., offer two good examples of companies that managed to keep things running smoothly.
While these challenges are shared by other companies, Helena Grannis, counsel at Cleary Gottlieb Steen & Hamilton, points out that bank shareholder meetings can be quite vocal.
“Shareholders come to them and have a lot of points they want to raise,” Grannis said. “It’s an active base that you don’t always see in other industries.”
Donald Cassidy, global head of corporate governance at Georgeson, a corporate governance consulting firm that is part of Computershare, notes that many banks have lots of retail shareholders. Many of these longtime investors like attending annual general meetings in person to ask questions of the executives.
Any technical issues?
“I think the vast majority of virtual meetings went pretty smoothly on the technological side and that was not an overall problem,” Grannis said.
While not everyone agrees, those for and against virtual-only meetings all see potential with a digital format.
The clear advantage is that many more shareholders can attend, including those who aren’t local — as well as interested parties who are not shareholders, said Cathy Conlon, head of corporate issuer strategy and product management at Broadridge. The Broadridge platform allows guests into the meeting just for observation.
“Institutional investors have access to companies today, while retail shareholders don’t in any meaningful way,” Conlon said. “This technology democratizes retail shareholders’ connection with a company.” She also argues that engaging retail investors is to a company’s benefit, because “retail investors tend to be supportive of management.”
Just because more shareholders can attend doesn’t mean they will.
Kelly Dvorak, corporate secretary of the $2.6 billion-asset Bank First, estimates that 100 shareholders, including employees and directors, typically attend Bank First’s in-person meetings, which last an hour and conclude with mingling over cocktails. This year’s virtual meeting on the GoToWebinar platform attracted 62 attendees.
She chalks up the decrease simply to a big change from what attendees were used to. However, the audience included shareholders who were not local and normally wouldn’t come.
Dvorak was pleased with this year’s annual meeting and reported no technical issues. Bank First chose GoToWebinar because employees already used it for video and telephone conferences. For logistical reasons, the bank accepted questions in advance rather than allowing them live and experienced no technical issues. Leadership kept things moving (the virtual meeting clocked in at 47 minutes) and posted materials on screen.
One plus was an automatically generated report detailing the number of people who clicked on the registration link, the number who attended, the number of shareholders compared with employee shareholders, and other data points.
“That specific information is very helpful and we don’t get that when we hold a meeting in person,” Dvorak said. For example, leaders might tailor their messages differently in future meetings.
The $113.8 billion-asset Discover chose Computershare as its platform because it already handled other components of Discover’s financial reporting. Robert Weiss, senior manager of public relations at Discover, whose team manages these events, notes there was a “cool-looking” dashboard that let operators see how many people were logged on, monitor questions in the queue and mute or unmute lines as necessary. Several premeeting rehearsals helped iron out potential problems.
“We had no technical issues during the meeting or afterward,” Weiss said.
Another plus was the savings. Discover’s annual meetings are typically attended by 15 to 20 participants, often longtime investors from the Chicagoland area.
“We didn’t need to have the board of directors fly in and attend what is typically a 20-minute meeting,” Weiss said.
The limits of virtual
In a July letter to the U.S. Securities and Exchange Commission, the Shareholder Rights Group, among other organizations, acknowledged that virtual annual meetings were necessary this year because of the pandemic. But they expressed concern about other issues that came up: instructions to remotely access these meetings were unclear, shareholder proponents were sidelined, and question-and-answer periods were cut short. (These problems existed across many different companies, not banks specifically.)
“If someone is in a room and wants to ask a question, everyone can see them,” said Sanford Lewis, director of the Shareholder Rights Group. “When this is done virtually it can be completely opaque. We think there were instances where questions were submitted and companies said to shareholders present that there were no more questions.”
Other elements of a face-to-face experience are irreplaceable for shareholders, from watching the CEO’s demeanor to holding side conversations with management. “A lot of the important business happens alongside the formalities,” Lewis said.
Weiss and Dvorak agree with that sentiment.
“We do cherish the face-to-face interactions with shareholders,” Weiss said. Discover allots an hour for its meetings, even though business is usually taken care of in less than 20 minutes, and Weiss regularly observes leaders sticking around to chat with shareholders.
For her part, Dvorak said, “We value that face time with our shareholders. I think you lose an element of connectivity when you have a virtual model.”
A spokesperson for U.S. Bank — which announced in March that its April annual meeting would be virtual — expressed a similar thought. “Having a virtual annual meeting meant that our leaders were unable to meet in person with local employees — from market leaders to branch tellers to local shareholders, key customers and U.S. Bank retirees,” the spokesperson said by email.
Looking to the future
If shareholders have their way, companies will return to the more traditional format — or even better, a hybrid version where shareholders can choose to attend either remotely or in person.
Grannis and Francesca Odell, partner at Cleary Gottlieb, said that institutional investors and proxy advisor firms were understanding this year but are not necessarily in favor of virtual meetings in the future.
“As long as they remain against it, I think companies will have to think very carefully about how they support virtual meetings and if they try to do it next year,” said Odell.
Lewis favors a hybrid approach. In the future, he likes the idea of livestreaming annual meetings to the public, “so the entire market, and not just those who hold shares, can see what’s going on,” he said.
Conlon of Broadridge countered that virtual meetings are superior to hybrid options, pointing to data that shows more than 90% of the 326 virtual meetings it facilitated in 2019 were virtual-only.
“We can’t put the genie back in the bottle,” she said. “We’re in a digital world, and COVID just accelerated what was going to happen anyway.” The number of virtual shareholder meetings Broadridge's platform hosted increased from 285 in 2018 to 326 in 2019, and 1,494 in the first six months of 2020.
For Discover, it’s too soon to decide what 2021 holds.
Weiss acknowledged that while leadership enjoys the personal interactions, “the fact that we had no technical issues and saved some money going virtual, it’s more likely than it was before to continue on in a virtual format,” he said. “But we’ll see how things play out the rest of this year and into next year.”
Bank First is leaning toward the traditional route. “All in all it was a very good experience, but we are looking forward to going back to an in-person format,” Dvorak said.
Despite their success with remote meetings, even these two banks couldn’t escape the practicalities of a physical component. Both had a small group of leaders sitting in one conference room, socially distanced, for the duration of their meetings.