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On March 19, 2020, Glass Lewis announced1 that for the duration of the 2020 proxy season, it will "take into account the extenuating circumstance of the COVID-19 pandemic when applying [its] policy on virtual-only shareholder meetings." The proxy advisory firm will review these meetings on a case-by-case basis and "will also note whether companies state their intention to resume holding in-person or hybrid meetings under normal circumstances."
For companies opting to hold a virtual-only shareholder meeting due to COVID-19 between March 1, 2020 and June 30, 2020, Glass Lewis will generally refrain from recommending to vote against members of the governance committee on this basis, provided that the company discloses, at a minimum, its rationale for doing so, including citing COVID-19.2 For all shareholder meetings occurring after June 30, 2020, and for all future meetings, Glass Lewis' standard policy on virtual shareholder meetings will apply, and it will therefore expect robust disclosure in the proxy statement concerning shareholder participation. The firm noted that "even if the pandemic continues well beyond this date, companies have been given sufficient time to address shareholder concerns as outlined in our standard policy."
Under its standard policy, Glass Lewis will generally recommend against the chair of the nominating and governance committee of a company opting to hold a virtual-only shareholder meeting if the company's disclosure of its virtual meetings procedures does not ensure that shareholders will be afforded the same rights and opportunities to participate as they would at an in-person meeting.3
Companies Move to Virtual Meetings; White & Case Survey
In light of the COVID 19 pandemic, in order to ensure the health and safety of employees and shareholders, and to comply with government-issued orders and guidelines, many North American companies are opting to hold their shareholder meetings on a virtual-only basis. Based on a White & Case survey of 24 S&P 500 proxy statement disclosures filed in March 2020:4
- Eleven of the 24 surveyed companies (or 46%) announced that they will hold virtual-only meetings;
- Only one of the 24 surveyed companies (or 4%) disclosed that it will hold an in-person annual meeting;
- Three of the 24 companies (or 13%) announced that they will hold a hybrid meeting (meaning an in-person with the ability for shareholders to participate remotely); and
- Nine of 24 companies (or 38%) disclosed that they are monitoring the situation and may make the change to a virtual meeting.5
Market Sentiment on Virtual Shareholder Meetings
The temporary change to Glass Lewis's policy is in line with current market sentiment on virtual shareholder meetings. While shareholder groups and others have previously expressed concerns regarding companies' use of the virtual meeting format, given the ongoing pandemic, even vocal opponents, such as the Council of Institutional Investors (CII), are considering whether an exception is appropriate in the current circumstances6 and how companies can simultaneously protect the health and safety of participants and respect shareholder rights. Similarly, Vanguard, which normally opposes virtual-only meetings,7 published a statement recognizing that public companies might need to adapt their approaches to shareholder meetings and "welcome[ing] the use of virtual meetings or other options that ensure that shareholders' voices are heard."8 In addition, several states, including New York and New Jersey, have eased state law restrictions on virtual shareholder meetings in light of the pandemic.9
1 The press release is available here. A complete copy of the updated guidelines for the United States and Canada can be found here.
2 An example of disclosure that Glass Lewis will support through June 30, 2020 can be found here.
3 Examples of effective disclosure include: addressing the ability of shareholders to ask questions during the meeting, including time guidelines for shareholder questions, rules around what types of questions are allowed, and rules for how questions and comments will be recognized and disclosed to meeting participants; procedures, if any, for posting appropriate questions received during the meeting and the company's answers, on the investor page of their website as soon as is practical after the meeting; addressing technical and logistical issues related to accessing the virtual meeting platform; and procedures for accessing technical support to assist in the event of any difficulties accessing the virtual meeting.
4 The survey sample consisted of 22 S&P 500 companies that filed proxy statements between March 19 and March 24, one S&P 500 company that filed on March 4 and one S&P 500 company that filed on March 18.
5 As discussed in our prior alert, "Corp Fin Staff Issues Helpful Proxy Guidance Amid COVID-19 Concerns," if a company changes to a virtual or hybrid meeting after filing its proxy statement, it would need to issue a press release and file the announcement of the change as definitive additional soliciting material on EDGAR.
6 See CII's Statement on Virtual Shareholder Meetings During Public Health Emergency, available here.
7 Vanguard's proxy voting guidelines can be found here.
8 The statement is available here. Vanguard asks that companies work within local regulatory frameworks, and publicly communicate any changes or delays of their proxy filings to the market.
9 Georgia have taken steps to ensure that companies incorporated in their states can comply with state law while holding virtual shareholder meetings. Other states, such as New Jersey, are allowing virtual-only meetings only during a state of emergency. These states are among the few that do not normally permit virtual-only shareholder meetings.
Andrea Rodriguez (White & Case, Associate, New York) contributed to the development of this publication.
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