The pandemic has reshaped many of the ways our society works, from public gatherings to workplace settings. For shareholders, the annual meeting season came at the start of the pandemic, causing last-minute transitions to online formats for public safety—and in this scramble, some companies dodged shareholders by literally muting them.  

Shareholders are partial owners of a company through stocks, which gives them a voice in the direction of a company—this can include ensuring social and environmental responsibility alongside company growth and stability. In March, the Securities and Exchange Commission (SEC) released guidance for virtual shareholder meetings.  

A new paper by Dr. Miriam Schwartz of Hebrew University of Jerusalem demonstrates how companies took advantage of the virtual format to minimize shareholders’ collective power. The paper, “How Shifting from In-Person to Virtual Shareholder Meetings Affects Shareholders’ Voice,” examines how companies may be stifling shareholders by limiting the types of questions that can be asked, keeping shareholders muted during online meetings, only offering short time windows for questions, and taking advantage of online communication barriers. 

Dr. Schwartz’s paper compared the 2019 shareholder meeting season to the 2020 virtual season using transcripts and audio recordings from 94 firms in the S&P 500. The research consistently demonstrates that virtual shareholder meetings were significantly shorter than in-person meetings and management spent less time addressing shareholder concerns. 

Typically, during the Q&A portion of in-person meetings, shareholders line up behind a mic to ask their questions. These questions may go over the allotted time frame or may not be relevant to the discussion at hand; regardless, when a person is physically present, it is difficult to ignore their concerns, regardless of relevancy or time limits. In the virtual arena, firms have more power in how a meeting will run, allowing them to evade shareholder concerns and thus, accountability. 

“Overall, what we can see here, is that there is a decrease in the amount of time spent on sharing information with shareholders,” said Dr. Schwartz in a virtual seminar on the paper. 

Dr. Schwartz noted there are several tactics companies used to impose limitations on questions during online shareholder meetings of the 2020 season. 

Muting Shareholders, Literally

The study analyzed questions submitted by two shareholders, John Chevedden and James McRitchie, in conjunction with the transcripts to determine how many submitted questions were answered; out of all the questions submitted to firms, only 36 percent were answered. While companies typically dodge shareholder questions, what is concerning here is the company’s ability to silence participants. 

Additionally, Dr. Schwartz found that companies would misleadingly portray a lack of additional questions during online meetings by stating, “we have addressed all the questions,” or “at this point, it seems there are no further questions, therefore we will conclude the meeting.” When these statements were compared with the number of questions submitted by shareholders to the company, it is clear that company management chose to not answer shareholder questions. Traditionally, in-person meetings make it possible for shareholders to object; however, in the online arena, shareholders are literally muted. 

“[In virtual settings,] the firm has more power in presenting the picture that is convenient for them,” says Dr. Schwartz. 

Additionally, companies would state, without prior notice, that only questions related to the proposals would be addressed, essentially eliminating questions regarding anything else. Eleven companies in the study used this tactic—10 out of 11 did not address any questions during the meeting. 

“[Shareholder meetings are] the one opportunity shareholders have each year to engage in-person with other shareholders and with company representatives,” writes McRitchie in his blog at CorpGov.net. “Virtual-only meetings remove these opportunities. They don’t have to.”

Democratizing Virtual Meetings

Virtual meetings have the potential to improve participation from shareholders by eliminating conflicts, taking less time, and allowing people to tune in from the comfort of their homes—in fact, Dr. Schwartz’s study noted that shareholder attendance increased overall in the online format. However, the key to a democratic process online is allowing shareholders to communicate with each other. 

Not all companies in the study used the virtual format to minimize shareholder voices. One company used a platform called Slido for their meeting, which allowed shareholder questions to be viewed among all participants, not just management. 

“Shareholders could upvote and downvote the questions,” says Dr. Schwartz. “[Firms] could actually see which questions were very interesting for shareholders and which were not.” 

Unlike scenarios where shareholders can ask only send questions in advance or can ask only questions related to proposals, a live polling platform like Slido allowed for a democratic process to understanding shareholder concerns. 

McRitchie believes that chat rooms are the essential function missing from shareholder meetings. Chat rooms would allow shareholders to have genuine conversations with each other, as well as clarify resolutions and company decisions among themselves. Additionally, the company management would gain insight into what shareholders care about. 

“If virtual meetings are to be considered shareholder, instead of incumbent meetings, chat room functions are needed,” states McRitchie. “The discourse between attendees is of critical importance.” 

The virtual format is far from perfect—shareholders may also experience issues like lack of access to high speed internet and computer illiteracy. While virtual meetings have a great deal to improve on before they can support shareholders in the same capacity as in-person meetings, the paper recommends that companies should make audio recordings and transcripts public to allow transparency around the information shared during meetings.

Additionally, disclosing the number of questions submitted, as well as the content of those questions, can help shareholders identify if there is simply a lack of concerns or if the company is purposefully withholding information. 
For the 2021 season, some company guidelines may choose to return to in-person meetings which follow CDC recommendations and some may continue virtually. It is also likely that most companies will adopt a hybrid model, where shareholders can attend in-person or virtually. 

Every year, Green America encourages many shareholders to vote on resolutions that advance social, environmental, and sustainable governance. We are co-sponsors of As You Sow’s 2020 Proxy Preview, a publication that provides samples of key resolutions facing corporate America. Stay tuned for 2021’s Proxy Preview and learn more about investing with your values at our Guide to Socially Responsible Investing and Better Banking at greenamerica.org/gsri.