NYC comptroller takes aim at virtual AGMs
New York City comptroller Scott Stringer on Sunday said he would be urging more than 15 companies to host in-person annual general meetings (AGMs) rather than continuing to use ‘virtual-only’ versions of the traditional gatherings with shareholders.
Stringer, who according to his office is concerned about the growing number of such meetings – where shareholders are not in the same room as corporate executives and directors – said he would recommend that the New York City Pension Funds adopt a policy to vote against directors at companies that continue to use them.
The office states that, over the past six years, the number of corporations hosting virtual-only meetings either online or over the phone has risen more than 700 percent, from 19 in 2010 to 155 last year. ‘Virtual-only meetings deprive shareowners of the fundamental right that, regardless of the number of shares they own, they can engage directly with management and directors – face-to-face – at least one-time per year,’ officials write in a related filing.
As comptroller, Stringer is New York’s CFO. His responsibilities include serving as a fiduciary to the city’s five public pension funds, which have a total of more than $170 billion in assets under management; and conducting performance and financial audits of all city agencies.
The comptroller’s office says it has started sending letters to the S&P 500 companies that hosted virtual-only meetings last year, along with companies that have announced they will host virtual-only AGMs this year. The letters outline its concerns with the practice, including the ability to silence investors, cherry-pick questions and avoid protestors.
The letters also call on directors to abandon the practice and use either traditional in-person meetings or hybrid ones, which the office says expand access by combining in-person meetings with aspects of virtual meetings.
‘It’s one of the great markers of American enterprise - whether you own one share or one million, you can speak at a company’s annual meeting,’ Stringer says in a statement. ‘Except now, in this interconnected world, companies are using technological tools to whittle away at investors’ rights and hide from accountability. Often, they want to avoid looking shareowners in the eye - they’re treating face-to-face interaction as a nuisance instead of a duty. If boards shirk this responsibility, shareowners should join us in holding them accountable.’
He adds: ‘Some companies are indeed using technology to boost shareowner participation, which we support. But it’s disingenuous to say virtual-only meetings broaden access – they often create barriers, rather than tear them down. It’s a sleight-of-hand and it’s wrong, because in some cases, companies are clearly using virtual-only meetings to avoid criticism.’
The office states: ‘Some companies – like Duke Energy and ConocoPhillips – are likely using online-only meetings to insulate themselves from uncomfortable interactions with concerned shareowners, while others may have moved to virtual-only meetings without realizing they are violating an important investor right.’
A spokesperson for Duke Energy says the AGM will be available to the company’s more than one million shareholders. ‘We believe this format will provide a consistent experience for shareholders no matter their location. In addition to institutional investors, we have a substantial retail shareholder base and the new format will allow us to reach and communicate more effectively with many of these individuals. This format also makes participation easy and inexpensive for shareholders who would otherwise be unable to attend,’ the spokesperson states.
She adds: ‘We spoke with a cross section of shareholders about the annual meeting and many are excited to have the ability to participate moving forward… Shareholders will have the opportunity to present their proposals and ask questions. Any questions that we are unable to answer during the timeframe of the meeting will be answered after the meeting and posted on our investor relations webpage.’
A spokesperson for ConocoPhillips said: ‘We are excited to embrace the latest technology to provide ease of access, real-time communication and cost savings for our stockholders and the company. Hosting a virtual meeting will facilitate stockholder attendance and participation by enabling stockholders to participate from any location around the world. We are planning to offer live dial-in capability so that participants can speak or ask questions over an audible channel. In addition to the annual meeting, we continue to actively engage with stockholders, investors and other stakeholders who are interested in ConocoPhillips.’
An example of the letters can be found here.