Glass Lewis Guidelines Update on Virtual-Only Meetings Due to COVID-19

Aaron Bertinetti is Senior Vice President of Research and Engagement at Glass, Lewis & Co. This post is based on his Glass Lewis memorandum.

The COVID-19 pandemic has caused significant disruption to people and companies around the world. In order to ensure the health and safety of employees and shareholders, and to comply with government-issued orders and guidelines, a number of North American companies are breaking with convention to hold their shareholder meetings on a virtual-only basis, including when a proxy statement has already been filed.

While Glass Lewis acknowledges concerns regarding virtual-only meetings, given the current situation, we believe that such meetings provide compelling advantages for both companies and shareholders to preserve the timing, certainty, agendas and voting of shareholder meetings. We do not believe discouraging virtual-only meetings during this time serves the interests of shareholders or companies.

Immediate Policy Update

For the duration of the 2020 proxy season (March 1, 2020 through June 30, 2020), we will take into account the extenuating circumstance of the COVID-19 pandemic when applying our policy on virtual-only shareholder meetings. We will review these 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, we 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.

Additionally, should these companies opt to continue holding virtual-only shareholder meetings in subsequent years, we expect future proxy statements to include the robust disclosure concerning shareholder participation described below. Our standard policy on virtual shareholder meetings will apply in those future years.

Finally, for all shareholder meetings occurring after June 30, 2020, our standard policy on virtual shareholder meetings will apply, and we expect robust disclosure in the proxy statement concerning shareholder participation. 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.

For an illustration of what Glass Lewis will support through June 30, 2020, please refer to the example set by Starbucks on March 4. A complete copy of our updated guidelines for the United States and Canada can be accessed here.

Policy Background and Shareholder Concerns

Shareholders and representative bodies have previously expressed concerns regarding companies’ use of this meeting format, as it holds the potential of silencing dissenting shareholders and could act as a shield to insulate management and the board from subpar performance or significant controversies. However, given the ramifications of the ongoing pandemic, even groups and shareholders who have argued ardently against the practice of holding virtual-only meetings, such as the Council of Institutional Investors, are considering whether the current circumstances warrant an exception – and how companies can effectively use this tool in a manner that both ensures the health and safety of participants and respects shareholder rights.

Glass Lewis is generally neutral on the use of virtual-only meetings, so long as they are structured to ensure meaningful shareholder participation. Glass Lewis’s standard policies provide that we will generally recommend against the chair of the nominating and governance committee if companies do not provide adequate disclosure concerning the protections afforded to shareholders when conducting a virtual-only meeting. 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.

As discussed above, given the COVID-19 pandemic and the changing expectations and restrictions on the number of people who can safely congregate, Glass Lewis has revised its policies concerning the use of virtual-only meetings through June 30, 2020.

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