Virtual shareholder meetings in the works
Some city companies schedule new format, others undecided
Annual shareholder meetings, like nearly everything else in the corporate world, are moving from in-person to on-screen — an unexpected trial run that will either accelerate the adoption of virtual meetings or confirm investor suspicions about them.
Federal health guidelines for avoiding the transmission of the new coronavirus and state shutdown orders are making it nearly impossible for companies to hold physical gatherings.
But instead of a considered shift to the virtual space, most companies are scrambling to secure an online provider, draft rules for how the meetings will be held and how shareholders can ask questions, and then get the word out.
Some have to decide if even having a few executives in the same room is possible or wise. “From a succession planning standpoint, it’s not smart,” said Francesca Odell, who heads the corporate governance group at Cleary Gottlieb Steen & Hamilton LLP in New York.
“If the company has a sick CEO, the first question will be who else from the C-suite has been exposed.”
It’s not just the format of the meeting that will set the 2020 shareholder season apart, Ms. Odell said. “The perspective will be different this year.”
More than half a dozen Pittsburgh public companies have announced they will hold their first virtual annual meetings this year in light of the COVID-19 pandemic. PNC Bank, PPG Corp., EQT Corp. and Ansys are some of the firms that told their shareholders to meet them online because of the coronavirus situation.
Several others are still deciding, although it’s not clear if physical meetings would still be allowed under Gov. Tom Wolf’s order that permits only businesses deemed life-sustaining to operate.
Wabtec Corp., the rail products firm, still plans to hold its annual meeting at its new North Shore headquarters May 15.
“We are monitoring developments regarding the coronavirus and preparing in the event any changes for the annual meeting are necessary or appropriate — like a virtual event,” Deia Campanelli, Wabtec’s chief communications officer, said earlier this week.
She said the company would notify shareholders if it decides to move to an online format and would post instructions on its website. “Any decisions would absolutely be made in accordance with shelter-in-place orders, as well as the evolving state of the COVID crisis.”
Downtown-based Koppers is still scheduled to hold its meeting at the Duquesne Club on May 6. The Downtown-based club, when reached by phone Tuesday, said it is generally closed for meetings and only doing takeout service from its dining facility.
FNB Corp, according to its most recent public filings, will meet in person at the Regional Learning Alliance in Cranberry in mid-May. That venue is closed until April 30, according to the bank’s website, in accordance with Mr. Wolf’s order.
The shift to virtual has
accelerated in the past few days.
On Monday, aluminum company Alcoa notified shareholders that it is moving the annual meeting online and ExOne Corp., a 3D printer manufacturer in North Huntingdon, disclosed that it changed its bylaws to allow the board of directors to convene shareholders virtually if they deem it best.
Kraft Heinz, which was supposed to host an investor day in May at the offices of McGuire Woods, Downtown, announced Monday that the food giant is postponing and will reschedule “ideally in the second half of 2020 once travel and meeting restrictions are lifted.”
“Given the current, unprecedented COVID-19 challenge, we believe it is better for Kraft Heinz, our shareholders and our customers that we continue our singleminded focus on getting our products from our plants to stores and onto consumers’ tables,” the company said.
Efficiency cited
CNX Resources Corp. got a head start on the trend when the Cecil-based oil and gas producer announced it would hold its first virtual shareholder meeting last year.
Brian Aiello, a spokesman for CNX, said the company’s move was prompted by its “commitment to technology and innovation.” He stressed the efficiencies — CNX saved about $70,000 — and the environmental benefits — an estimated 253,216 pounds of CO2 were not emitted as a result.
“Most importantly,” he said, “we provide the opportunity for more engagement with our shareholders.”
In the past, “There has been little to no attendance by our shareholders at CNX’s in-person annual meetings,” the company wrote in its latest sustainability report. So far, the virtual format hasn’t changed that.
CNX allotted 10 minutes for a question-and-answer period in its virtual meeting guidelines, which said the company would take written questions and route them to executives to answer during the call. But no questions were asked and the meeting concluded in less than 10 minutes total — not unlike the in-person affairs. CNX didn’t provide the number of participants who tuned in last year.
According to data from PwC, last year 248 companies overall held virtual shareholder meetings, compared to 212 in 2018. In 2011, only about two dozen held virtual-only meetings.
Companies that have chosen the digital route may have shareholders spread across the world, making travel to a physical location for a brief meeting impractical, Ms. Odell said.
Those that do it well, she said, ensure shareholders get the same chance to talk to management as they would if they were sitting across the room from the CEO.
Advisers skeptical
Proxy advisory firms, which help guide shareholders on good governance practices, have generally disapproved of virtual-only annual meetings, questioning whether just having the ability to have more people participate virtually translates to high quality participation.
But in the words of one of those firms, Glass Lewis, recently, “Everything in governance is affected by the coronavirus pandemic.”
Glass Lewis has said in the past that it would recommend shareholders vote against members of a company’s governance committee if they decide to forgo inperson annual meetings.
This year, the adviser said it would “generally refrain” from doing so.
But as with the other major advisory firm, Institutional Shareholder Services, Glass Lewis said public companies need to cite COVID-19 as their reason for going virtual and they need to establish and communicate how shareholders will be given the opportunity to engage with the company’s leadership.
The meeting format won’t be the only thing different about this year, Glass Lewis predicted.
“What governance issues will the coronavirus pandemic impact?” it asked in a website post. “In short, all.”
There will be more attention on executive pay packages, the adviser wrote, and the long-standing issue of corporate boards dominated by older men — the demographic most susceptible to coronavirus complications and death — presents a novel problem.