WEST SACRAMENTO, Calif.--(Guidelines for Protecting and Enhancing Online Shareholder Participation in Annual Meetings,” that shows how technology can boost shareholder participation through online annual meetings.)--CalSTRS, the California State Teachers’ Retirement System, as part of an industry working group, has issued a report titled, “
“Given a company’s wide array of shareholders and their varying levels of sophistication, access to technology and interest in participating in shareholder meetings, companies should guarantee the shareholder meeting is accessible to all of a company’s shareholders, to the extent practicable”
States vary widely in allowing virtual participation at corporate annual meetings but the trend towards using technology to allow increased shareholder participation is growing. The working group’s goal: To ensure technology is leveraged in ways that increase shareholder participation and voting, preserve shareholder rights, and encourage engagement at annual meetings.
“Online participation in shareholder meetings presents an opportunity, through the use of technology, to improve corporate governance by allowing shareholders to attend and participate in shareholder meetings, regardless of their location,” said CalSTRS Corporate Governance Portfolio Manager Janice Hester-Amey. “It also provides for increased communications among shareholders, management and directors.”
CalSTRS has been a leading advocate for shareholder rights and increased shareholder participation in annual meetings. As Chair of the working group, Hester-Amey continues the pension fund’s long-standing corporate governance leadership role by bringing together the industry leaders who comprise the group.
The working group, involving business, labor, investing and governance leaders, urges each company to consider its shareholders’ needs and costs when determining whether meetings should be virtual-only, exclusively in-person or a “hybrid” of the two. The group’s principles seek to not merely reproduce in-person shareholder meetings or go beyond currently accepted best practices for in-person meetings. The principles seek to leverage technology to safeguard shareholder rights, and reflect costs and benefits to companies and shareholders.
“Companies electing to allow online participation in shareholder meetings should employ mechanisms to protect shareholder interests and ensure technology is not being used to avoid dialogue that would otherwise be available at an in-person shareholder meeting,” said AFL-CIO Office of Investment Deputy Director Brandon Rees.
“Given a company’s wide array of shareholders and their varying levels of sophistication, access to technology and interest in participating in shareholder meetings, companies should guarantee the shareholder meeting is accessible to all of a company’s shareholders, to the extent practicable,” continued Rees.
The AFL-CIO is the umbrella labor federation representing more than 12 million working men and women in 56 unions throughout the U.S.
The working group also suggested that companies establish and adopt best practice rules of conduct for online meetings in order to promote the same dialogue among shareholders, management and directors that is possible at exclusively in-person shareholder meetings – and be consistent with applicable state law. It offered as “acceptable practices” the following examples, among others:
- Displaying all reasonable questions asked during a meeting.
- Organizing and answering questions based on groupings of related questions.
- Organizing and answering questions based on the order in which they are received.
- Establishing procedures for questions received but not answered during a meeting.
“Twenty-two states, including Delaware, Minnesota, Ohio, Pennsylvania and Texas, currently allow virtual-only shareholder meetings,” said Keir Gumbs, Partner at Covington and Burling LLP, and the working group’s legal advisor. “Eleven states require a physical location for shareholder meetings, but permit remote participation in such meetings via the Internet (i.e., a hybrid meeting).
“Some states, such as California and Maryland, allow virtual-only meetings, with certain other conditions,” he added. “Eighteen states, including Georgia, Massachusetts, New Jersey, New York and Wisconsin, effectively preclude companies incorporated in those states from hosting virtual-only or hybrid meetings of shareholders.”
A complete list of the Best Practices Working Group participants can be found in the report.
The California State Teachers’ Retirement System, with a portfolio valued at $153.7 billion as of April 30, 2012, is the largest teacher pension fund and second largest public pension fund in the United States. CalSTRS administers a hybrid retirement system, consisting of traditional defined benefit, cash balance and voluntary defined contribution plans, as well as disability and survivor benefits. CalSTRS serves California's 856,000 public school educators and their families from the state’s 1,600 school districts, county offices of education and community college districts.