AFTER years of neglect by all but a few companies, shareholder meetings are staging a significant comeback on the Web.
Corporations big and small are investing in their online shareholder meeting communications in light of rising shareholder activism, new electronic delivery laws, and an increased focus on stakeholder engagement.
In our new guidelines for shareholder meetings on the Web, we highlight exciting new practices and show how leading companies around the world are using their meetings to engage and reinforce their relationships with their shareholders. Interestingly, after years of lagging their international peers U.S. companies have recently been leading the charge to create more engaging online experiences for their shareholders.
One impetus has been the advent of the Securities and Exchange Commission’s (SEC) new “notice-and-access” model for online delivery of annual reports and proxy statements. Several large companies, including Nike Inc (NYSE:NKE), Microsoft (NASDAQ:MSFT), Sara Lee Corp (NYSE:SLE), Sun Microsystems (NASDAQ:JAVA), and SYSCO Corporation (NYSE:SYY) are using the notice-and-access system.
Insurance against rising activism
The renewed focus on shareholder meetings follows several years where many companies paid little attention to how they treated their annual meetings on their websites. This was partly due to a perception among investor relations departments that investors do not care about shareholder meetings. While this may hold true for analysts and portfolio managers that IR professionals have most contact with, it is not reflective of the broader shareholder audience.
Nowhere is that clearer than in the rising activism amongst shareholders. In its 2007 Post Season Report released last week, RiskMetrics Group’s Governance Research Services (formerly Institutional Shareholder Services) reported that as of Sept. 15, 656 investor proposals were included on corporate ballots in the U.S., up from 581 at the same time last year. So far 107 shareholder proposals have won a majority of votes cast, compared to 116 proposals in 2006 and just 85 in 2005.
|Big U.S. companies like Sara Lee Corp. are paying more attention to how they treat their shareholder meetings on the Web as they move to default e-delivery amid growing shareholder activism.|
At the same time, the Web is increasingly becoming a front in proxy battles. At low cost, shareholder activists of every stripe are using new Web technologies to carry their message to investors, often with assistance from the media. They include opportunistic hedge funds to Web-savvy individual investors like Eric Jackson (whose campaigns we wrote about in July).
Against this backdrop, it has become vital for companies to harness the Web as a counterpoint to activist campaigns and to provide proof of their responsiveness to shareholders — even when there are no contentious issues on the ballot.
Notice-and-access prompts drive for better web experience
Default electronic delivery of shareholder meeting materials is being made possible in the U.S., the UK and Australia thanks to recent legal changes. Instead of sending shareholders printed annual reports and proxy statements in the mail, shareholders are being asked to access the documents on the Web.
But this is easier said than done. Shareholder reports that arrive in the mail are much more intrusive than web-based ones. It is a major challenge to get people to switch on their computers, type in a URL, read the annual report and proxy statement, and then type in a 12- or 14-digit code to access an online voting card.
There has to be a strong incentive for people to make the effort. A well planned, engaging and expertly executed online annual meeting campaign can provide the needed incentive for people to want to participate. However, as we wrote recently in SEC’s notice-and-access model is a mess, companies are failing in key respects to meet the challenge.
In our new guidelines for shareholder meetings on the Web, we counsel companies to see their annual meetings as campaigns rather than isolated events. The objective should be to secure the broadest possible level of participation by shareholders of all sizes and demonstrate that companies take shareholder input seriously.
Engagement is fashionable
Engagement has been all the rage among marketers and corporate responsibility professionals for some time — and now corporate governance and investor relations departments are getting in on the act.
Shareholders are obviously a key stakeholder group for public companies, but the approach thus far has been somewhat elitist, with companies usually engaging with only their biggest shareholders. Witness Pfizer’s decision to hold summits with only its biggest investors, or the fact that large investors withdrew more than half of their proposals on majority voting, stock option reforms, and sustainability reports after private negotiations with companies, according to data collected by GRS.
However, some companies are recognizing the need for broader, more open dialogue with all of their shareholders, rather than just the powerful few. In July, AMERCO (NASDAQ:UHAL) broke new ground by becoming the first company to use the notice-and-access process and launch an online forum for shareholders to discuss its proxy materials.
Even when few shareholders participate, companies that provide online engagement mechanisms demonstrate that they are accessible and accountable.
Against the background of these three forces — growing activism, default electronic delivery and the stakeholder engagement trend — it looks as though 2008 could be the year when shareholder meetings finally enjoy their time in the Web limelight.