Earlier this year we published our Insights into the Upcoming Proxy Voting Season, where we discussed the expected impacts of COVID-19 on annual general meetings, and in particular our expectation that there would be an unprecedented number of virtual-only meetings. This proved to be the case: according to ISS Analytics, as of May 13, 2020, the total number of global shareholder meetings in 2020 that were virtual-only was 3,900. By comparison, that number was 286 for all of calendar 2019.1
Our main concern about virtual-only meetings is that they have the potential to adversely impact shareholder rights. For example, Berkshire Hathaway hosted a virtual-only meeting where shareholders were required to vote and submit questions in advance of the meeting; in other words, votes and questions could not be submitted in real time. This posed a number of concerns:
Vetted Questions
Shareholders were required to submit questions to three journalists, who would then decide which questions were the most “interesting and important.” Although the directors stated that they had no prior knowledge of what questions would be asked, they noted that they were not willing to discuss politics or specific investment holdings.2 Vetting questions diminishes shareholder rights as there is a potential for management to avoid speaking to material topics impacting the business.
No Real-Time Voting
Many shareholders prefer to vote during the meeting to give directors an opportunity to clarify items on the ballot. For this meeting, many shareholders were interested in hearing the rationale behind management not supporting a shareholder proposal calling for the inclusion of women and minorities in director and CEO searches. When asked about this shareholder proposal at the meeting, Mr. Buffett indicated that he was “in sync” with the proposal’s objective but just not the means to achieve it.3 As such, shareholders may have voted differently on this proposal if allowed to vote in real time.
At RBC GAM, we believe a virtual-only meeting experience is not directly comparable to an in-person experience for all shareholders. Although a change of process was required in light of COVID-19, shareholders need to monitor the situation closely to ensure virtual-only meetings do not become the new standard without the appropriate mechanisms to protect shareholder rights. Generally, we would withhold our support for the election of directors on the Corporate Governance committee if the company adopted a virtual- only meeting format and the resulting meeting format negatively impacted shareholder rights. This year, RBC GAM did not vote against the election of any directors due to the adoption of a virtual-only AGM.
Learn more about RBC GAM’s insights on the emerging trends in responsible investment.