Annual meetings are a regulatory requirement for most public and private companies. While many retail investors may think a company’s annual shareholder meeting is like the extravaganza put together by Berkshire Hathaway, typical annual meetings are administrative and follow a specific format. Investors who own shares in a public company will receive a notification about that company’s annual meeting. This notification will include the meeting’s agenda, the election of the company’s board of directors, selection of independent registered public accounting firm, and the ability to vote on any proposals that are put before the board, either by shareholders or company management. These meetings also allow shareholders to ask questions to representatives of the company. Unlike Berkshire Hathaway’s five-hour question and answer session with Warren Buffet and Charlie Munger, most annual meetings last no longer than an hour.
Over the past several years, some small- and mid-size companies have made the switch to virtual annual meetings from physically-hosted annual meetings. While this trend was starting to gain momentum, we believe the COVID-19 pandemic will drive most companies to host virtual annual meetings in 2020.
Below are some of the top reasons why virtual annual meetings may be right for your company:
- Logistics and cost. Physically-hosted annual meetings are usually scheduled during working hours and held in large conference rooms in hotels or meeting centers. Listed below are just some of the staffing and material requirements needed to host an in-person annual meeting.
- Staff, typically company employees
- Computer with an internet connection
- Reliable audio and video capabilities
- Hard copies of shareholder materials, e.g., current SEC financial documents and proxy statements
Virtual annual meetings do not have these requirements, as corporate management will make their presentations and answer shareholder questions via a teleconference or webcast, saving both time and money in the process.
- Scalability. A virtual annual meeting can be infinitely scalable. If more shareholders than expected participate in a virtual annual meeting, the telecommunications provider can easily add more lines to accommodate as many shareholders as possible, which compares favorably to cramming more chairs into a crowded hotel conference room.
- Limitless location. Management and shareholders can present and attend a virtual annual meeting from anywhere, as long as there is a good telecommunications connection.
- Increased shareholder turnout. Annual meetings are typically scheduled during the workweek, which can limit the number of attending shareholders. With a virtual annual meeting, shareholders can simply log in to the meeting without having to travel to a specific location.
- Multiple vendors. With the rise in popularity of virtual annual meetings, the number of quality vendors has also increased. Transfer agents, proxy solicitors, earnings call hosts, and webcasters have all recently begun to offer virtual annual meeting services.
- Real-time voting. Most virtual annual meeting vendors also offer real-time, live-meeting voting. This service typically includes tabulation and inspectors of election services.
Over the past several years, virtual annual meetings have become more popular with small- and mid-size companies, as this switch from a physical annual meeting can save time and money. In the wake of the COVID-19 pandemic, we believe companies of all sizes will shift to a virtual annual meeting in 2020. Due to the reasons we pointed out, we feel the adoption of virtual annual meetings will continue to become more popular as companies of all sizes begin to embrace them.
If you would like to discuss how your company can transition from physical to virtual annual meetings, contact our team today.
Greg Chodaczek, Managing Director