On a global basis, the Covid-19 pandemic has been by far the biggest issue faced by companies during proxy season. The pandemic shut down office buildings and businesses across the globe and forced people to shift to remote working, staying inside their homes with limits on physical interaction with the outside world – and heralded the introduction of the virtual AGM.
Virtual meetings become the standard
Robert Marese, president at MacKenzie Partners, says virtual meetings have emerged as standard practice during the pandemic and will likely continue at least into 2021, and perhaps beyond.
‘I think [companies] realize there is broadly a cost saving and a convenience to holding a meeting virtually,’ he says. ‘It protects your directors and senior management as well as shareholders that may attend the meeting. As to whether it survives past 2021, I suspect it will.’
As executives and investors began to get used to virtual AGMs, they found the lack of needing to sit across from each other at a table liberating, Marese says.
‘No one was missing getting on an airplane, running around visiting shareholders and staying in hotels,’ he says. ‘It allowed for fulsome engagement and, as the season moved on, I think everyone became more comfortable with, and accepting of, not needing to travel. It’s far easier to sit in your office and have a conversation with a shareholder over Zoom or the phone. There is a growing appreciation of the lack of a need to travel.’
When the pandemic is over, however, not everyone expects virtual AGMs to continue as the normal course of business.
Rob Walker, global co-head of asset stewardship at State Street Global Advisors (SSGA), says companies should resume physical meetings once it is safe to do so. He says there were some concerns that SSGA’s rights as shareholders would be impacted by the shift to virtual meetings, but that did not end up being the case. Many firms feared virtual meetings would not run smoothly, but this concern proved unfounded, according to Marese.
‘We were relieved the virtual meetings worked as seamlessly as they did and we were surprised that there were generally very few questions presented at virtual AGMs,’ he says. ‘In March and April when we first needed to hold AGMs in a virtual environment, one of the concerns was that it would provide internet troll access to the meeting. People would be more inclined to attend and ask questions, and it would be uncomfortable because it would be difficult to control the content of what was being asked. That didn’t happen.’
A focus on human capital management and diversity
The pandemic has shone a bright spotlight on managing human capital. ‘You need to safeguard the business, the health of the workforce and [the health of] the proxyholders,’ Walker says. ‘We’ve engaged with 150 firms during proxy season on Covid-19 matters. A lot of conversations we’ve had have been around employee health and safety and supply chains: the realization was that a highly centralized supply chain doesn’t necessarily work during a pandemic.’
Recent events across the globe underscored the importance of racial equity and diversity more generally, according to Ben Colton, global cohead of asset stewardship at SSGA. Issues such as headline or reputational risks have emerged, and this means boards need to have oversight of diversity. He says better disclosure of workplace diversity and ethnic and gender makeup is needed. ‘It is growing in importance and there is an academic case for diversity, so we’re looking for a strategy and targets from companies,’ Colton says. ‘The EE0-1 Survey – we want to see that publicly disclosed. We’re seeing that firms have been very receptive to this and I feel there will be a critical mass of companies disclosing this information in the next six to 12 months.’
There is an understanding that companies won’t hit their diversity targets immediately; nevertheless, Colton emphasizes that it’s important for investors to understand what those targets are and how corporate boards plan to hit them. Marese says investors are going to want to know how companies are preparing for another Covid-like event more broadly, and to find out what they learned from the pandemic. Questions on human capital policy and how they were changed by the pandemic are going to be front and center next proxy season, he says. Investors will want to know how businesses are considering their employees – and how they are protecting them.
‘It’s a liability issue if corporations aren’t protecting their employees,’ Marese points out. ‘Aside from the social aspect of it, there is the liability aspect and the moral cost of not taking care of employees.’
This article originally appeared in the Winter 2020 issue of IR Magazine.