I did some research into why I had trouble getting into yesterday's Danaher Corporation virtual annual meeting. In my previous post, I wrote:
The [Danaher virtual annual meeting] site asked for my control number and password. I entered both, but couldn't get in. "Invalid." .... So, I ended up having to enter as a guest with no ability to vote or ask questions.
For the avoidance of confusion, it had nothing to do with the virtual meeting platform having poor technology or being broken or glitchy. So, then what did happen?
The Gory Details of What Happened
Knowing you need a control number to enter any virtual annual meeting, I asked my broker for the control numbers I would need to attend the virtual annual meetings of a bunch of companies, including Danaher. They sent me a list of all of them, each one 16-digits. The one they sent me for the Wells Fargo meeting worked. The one for Danaher didn't. Why?
I went back to Danaher's notice of the change to virtual-only. It gave separate instructions on how to attend the meeting for record shareholders and beneficial owners of Danaher shares:
Attending the Virtual Meeting as a Shareholder of Record
If you were a shareholder of record as of March 9, 2020, you can attend the meeting by accessing the meeting center site at www.meetingcenter.io/277601749 and entering the control number found on the Proxy Card or Notice of Internet Availability of Proxy Materials you previously received and the meeting password, DHR2020.
Registering to Attend the Virtual Meeting as a Beneficial Owner
If you were a beneficial owner of record as of March 9, 2020 (i.e., you held your shares in an account at a brokerage firm, bank or other similar agent), you will need to obtain a legal proxy from your broker, bank or other agent. Once you have received a legal proxy from your broker, bank or other agent, please email a scan or image of it to our transfer agent, Computershare, at legalproxy@computershare.com, with “Legal Proxy” noted in the subject line. Requests for registration must be received by Computershare no later than 5:00 p.m. Eastern Time, on April 30, 2020. You will then receive a confirmation of your registration, with a control number, by email from Computershare. At the time of the meeting, go to the meeting center site at www.meetingcenter.io/277601749 and enter your control number and the meeting password, DHR2020.
I knew I was a beneficial owner, so that's why I asked my broker for the control number. It turns out my broker gave me the control number to vote my shares in advance of the meeting, not the control number to attend the meeting. Nope, they're not the same, at least not for this particular meeting.
What I needed to do to get the meeting attendance control number was go through the steps to (1) ask for and get a legal proxy from my broker, (2) scan and email it to the transfer agent at least six days before the meeting, (3) watch for an email back from the transfer agent with the control number, and then (4) use that number along with the password listed on the notice to enter the meeting site on the day-of. I assumed that if I asked my broker for the control number, they'd be able to just get it and save me the hassle. ("When you assume....")
This nonsensical process was too complicated even for me. If someone who once made a living drafting proxy statements, proxy cards, VIFs, notice-and-access mailings, and annual meeting scripts (and even signed the annual meeting notices that went out to millions of shareholder accounts!) can't figure out how to get into a virtual annual meeting, something is wrong here. (Still, I should be embarrassed!)
Why So Complicated?
The underlying reason why these things are the way they are has to do with the "proxy plumbing" system of how shares at public companies in this country are held and get voted: the whole record/registered versus beneficial/street name thing that you can only explain to someone using a flow chart that looks like it came straight out of a Rube Goldberg cartoon. We have put up with this for too many years. The SEC issued a 151-page concept release about it in 2010 and convened a roundtable to talk about it in 2018, and all parties agree it needs an overhaul, but inertia is a powerful thing.
So, is what I'm saying that this so-called "plumbing" system is such that if Mr. & Ms. Main Street hold shares of a company through a broker, which most people do because most people buy shares through a broker, then they'll always have to jump through all of those hoops I described above just to attend the one meeting the Streets have the legal right to attend? The answer is... it depends! It depends on what transfer agent and virtual annual meeting service provider the company whose annual meeting they want to attend use and a few other technical things I won't bore you with. And it's not because of the competency the different transfer agents or quality of the different service providers. It's because using different combinations of vendors can result in different processes being necessary to get into these virtual meetings. I won't have to do what I was supposed to do at Danaher to get into every virtual annual meeting as a beneficial owner, but for some I will. It's another outcome of our proxy plumbing system that makes no sense.
Cry Me a River
OK, so I wasn't able to vote at the meeting. Is that really such a big deal that I have to spill so much ink over? I don't (and never will) own enough shares of Danaher (or any other public company) to make the least bit of difference for any of the voting outcomes. But, that's not the point. The point is that the process for someone to get into a virtual annual meeting should be smoother because one day some shareholder with enough votes to actually make a difference and wants to vote at a virtual-only shareholders meeting could get locked out because s/he made the same mistake I did. (If you don't believe this could happen, ask my friend Bruce Goldfarb.)
It's All Good!
Running into these types of issues has been frustrating for some shareholders who really care about this stuff, but all of this is actually good and will help us as we go forward. Up until now, we didn't have enough of a sample size of virtual-only annual meetings to really see where the pain points are. Some of the glitches people ran into before this year were passed off as outliers or flukes. This year's challenge, where practically all companies and service providers have been forced to switch to virtual-only, and with no way of anticipating this, will pressure-test the virtual annual meeting concept. It will tease out the shortcomings and benefits and give us a lot of data to work with. We'll need to refresh what we thought were the "best practices" with the new learnings.
My experience at Danaher highlights one of the shortcomings of virtual annual meetings. An ideal virtual annual meeting should replicate the in-person meeting as closely as possible. If I had attended the company's annual meeting in person without the proper credentials to enter, there would have been people from the company, transfer agent, tabulator, and inspector of election in the room who would have helped sort things out for me. They would have asked for my brokerage account statement showing I owned the shares as of the record date for the meeting. If I didn't have that on me, we would have called my broker and had them fax over a legal proxy for me to enter the meeting. That happens all the time, and it's fixed within a matter of minutes. At this virtual annual meeting, I had no way of doing that. The notice did list a site to go to for "technical or logistical issues in accessing the meeting center site," but that site was not for swimming through the proxy plumbing system, and the email address for the transfer agent listed in the notice couldn't get to anyone to help me right that second. Given the entire meeting lasted 13 minutes, I needed help on the spot.
I'm confident these kinds of things will get sorted out before next year's annual meeting season. In the meantime, let's remember that this is a challenging year for everyone, the virtual annual meeting has not yet been perfected, and everyone is learning in real-time. Companies (except for a few bad apples) are trying to get this right and are not using the virtual-only annual meeting as a new tool to muzzle and disenfranchise those they don't like. After all of this is over, we'll work together to make it work better for all of us. I look forward to being part of that effort.