"VSMs on 'Autopilot'… Is that Legal?" (from the OPTIMIZER)
[This reaction to my previous post about pre-recorded virtual annual meetings is reprinted with permission from my friend, Carl Hagberg, from The Shareholder Service OPTIMIZER, Vol. 27., No. 2, Second Quarter 2021.]
VSMs on “Autopilot”… Is that Legal?
Several Shareholder Meeting experts have been noting the fact that many meetings this season have clearly been largely and sometimes totally “on autopilot” and musing on whether this is “Legal” - including our friend and fellow meeting devotee Doug Chia, who concludes that it is “a novel & unsettled question.”
Doug notes, correctly, in our non-lawyer’s opinion, that “When a specific set of people are required to meet to accomplish a specific thing on a designated date and at a designated time, to me that means all of those people have to convene, or be invited to convene, and do what needs to be done at the same time, even if it’s on a teleconference or video-conference instead of in the same room. As we know, the laws of most states (including Delaware) allow companies to hold a shareholder meeting “virtually” (i.e., with no physical meeting place) if certain requirements are met. But, even if everyone is together only in cyberspace, they still have to be there at the same time.”
So for starters, the OPTIMIZER says that so-called “Shareholder Meetings” that run completely “on autopilot” - AND that do not allow shareholders a “reasonable opportunity to participate” - by being able to ask a question, and get an answer in real time is NOT holding a “Legally Conducted Meeting” - even before considering state laws that make it clear that shareholders must have the ability to VOTE at a Virtual Meeting while the Meeting is in progress…which totally auto-piloted meetings did not allow for at all.
Doug notes that “As I’ve said many times before, there is no legal requirement for a corporation to have a Q&A session at an annual meeting.” - and here we do not quite agree: While there is no “black-letter law,” for sure, the idea that a share-owner who comes to a “meeting” to vote could be prohibited from asking “reasonable questions” before voting on “the business before the Meeting” would never be upheld if legally challenged, in our book - based not only on common sense, and on any careful analysis of what a “meeting” is - where the ability to speak on the business at hand is a given, we say - and has been for 150+ years.
While we agree that the right to ask “general questions” is not really ‘a given’ from a legal perspective, the question of whether meeting procedures are “legal” or not, is not really the question to be focusing on, however - especially in light of the many breaches of protocol that have occurred this year:
Rather, public companies - and their share owners of every size and description - need to be asking whether the meeting as a whole is properly respectful of the fact that share owners are the owners of the business - and, more importantly, we think, if you are an issuer - how likely they are to rise up in revolt if public companies do not give them what they think is the respect and consideration they have by-and-large received, for nearly two centuries. We say it’s a very big risk indeed…