Virtual-only shareholder meetings: virtually over?

A continuing topic of debate is whether companies should hold their annual shareholder meetings virtually, return to an in-person format, or adopt a hybrid approach. 

The Canadian securities regulatory authorities and various proxy advisory and governance organizations have recently published guidance advocating for shareholder meetings to be held in both online and in-person formats, rather than in-person only. Such a hybrid format is said to be optimal as it allows shareholders to engage directly with management and the board, while also continuing to permit shareholders that would not otherwise be able to attend to participate virtually. On the other hand, hybrid meetings necessitate all of the costs and logistics (including travel) of two separate formats of meetings, which, depending on levels of shareholders attendance and participation, may be difficult to justify.

Canadian Securities Administrators (CSA): The CSA published updated guidance on virtual shareholder meetings in February. Recognizing that the conduct of shareholder meetings is primarily governed by corporate law and a reporting issuer’s constating documents, the CSA has largely kept its guidance to the topic of appropriate disclosure about the logistics for accessing, participating and voting at a virtual meeting. However, unlike in its original guidance from February 2022, the CSA is now recommending that issuers consider holding their shareholder meetings both virtually and in person.

Canadian Coalition for Good Governance (CCGG): CCGG published a Virtual Shareholder Meeting Policy in January that recommends strongly against virtual-only meetings on the basis they may be used to “limit shareholder voices and adversely impact the ability of shareholders to exercise their rights and directly express themselves to boards of directors.”

Ontario Teachers’ Pension Plan (OTPP): OTPP has expressed a preference for hybrid meetings of shareholders since the publication of its 2022 proxy voting guidelines. While recognizing that virtual meeting technology provides a safe way to hold a meeting and allows for greater inclusion by shareholders, OTPP has concerns that virtual-only meetings can be overly controlled by the company.

Glass Lewis (GL) & Institutional Shareholder Services (ISS): GL provided a minor update to its proxy voting guidelines for 2024 on the topic of virtual meetings. GL has said for a number of years that it may recommend voting against the chair of the governance committee if the company holds a virtual-only meeting and does not provide adequate disclosure in the information circular regarding shareholder participation rights and opportunities. New for 2024, GL may also recommend a negative vote if the disclosure is ambiguous or the company discloses that virtual participants are not afforded all of the protections outlined in the GL guidelines. ISS has not published any further guidance since its April 2020 COVID-related publication.

Globe and Mail: The Globe and Mail released its 2024 Board Games marking criteria in January. New for 2024, a criterion has been added for virtual shareholder meetings. A company will be awarded one mark if it holds a hybrid shareholder meeting, but no marks if the meeting is solely in-person or virtual. 

MÉDAC: Echoing the above policies, Montreal-based investor rights group le MÉDAC has taken a stance against holding virtual-only meetings. Every year, the organization submits various shareholder proposals to the seven largest banks in Canada as well as to a number of large corporations. This year’s proposals include a motion that annual shareholder meetings be held in-person, and that virtual meetings be added as a complement to, but not a substitute for, in-person meetings. 

Guidance from the CSA and proxy advisory and governance organizations

The following are the combined recommendations of the CSA, CCGG, OTPP and GL for virtual meetings:

• Facilitation of shareholder participation: Meetings should allow for maximum shareholder inclusion and participation. Shareholders should be able to communicate between themselves as well as with the board of directors and management. Shareholders should be able to vote, make motions, raise points of order, speak to shareholder proposals and pose questions (including follow-up questions from the floor) in real time, without prior gatekeeping or vetting by management.
• Comparable participation rights: Virtual attendees should have the same opportunity to vote, speak, and ask questions as if they were participating in person.
• Access & voting instructions: Disclosure in the management circular and proxy materials should include complete, thorough and transparent instructions for registration, shareholder authentication and voting. The instructions should be provided in plain, easy-to-understand language. Particular care should be taken to ensure the process for participation of beneficial shareholders is not overly cumbersome and does not require unnecessary additional steps.
• Transparent Q&A procedures: Issuers should provide information on the procedures for asking questions in advance of and/or during the meeting and how questions will be addressed during the meeting (or after if there is insufficient time during the meeting). Virtual attendees should be able to ask questions without having to submit them in advance. All questions should be answered. Should there be insufficient time during the meeting to address all questions, they should be posted, together with responses, within 72 hours of the meeting.
  
  Any associated guidelines, including time restrictions or rules around what types of questions are allowed, should be communicated to shareholders in advance. Note that the CSA no longer includes in its guidance a recognition that, similar to in-person meetings, issuers and meeting chairs may have to apply some discretion in fielding questions and managing the meeting.

• Shareholder proposals: If a shareholder proposal will be voted on at the meeting, issuers should coordinate with the proponent ahead of the meeting and ensure it has the opportunity to speak to the proposal and respond to any questions that may arise.
• Accessible technology: Issuers should use an accessible video-based technology platform that facilitates virtual shareholder access, voting and real-time participation. The ability to attend and participate in a shareholder meeting should not require anything more than a basic level of technological proficiency.
• Process & tech support: Issuers should explain how shareholders can obtain assistance in the event of difficulties during the registration, authentication and voting process.
• On camera: Speakers, whether directors or shareholders, should be on camera so all virtual attendees can see them.
• Director presence: At the very least, the CEO, board chair, lead director (if applicable), and committee chairs should be in attendance and visible to all virtual attendees.
• Chair: Ensure the chair of the meeting is well versed in meeting rules and procedures and exercises discretion with a view to the principles of transparency and accountability to shareholders. In addition, ensure the chair is experienced and knowledgeable in the technology platform being used.

New for 2024, GL may recommend voting against the chair of the governance committee where the company’s disclosure is deemed ambiguous or the company discloses that shareholders participating virtually are not afforded the protections outlined above.