HP won't be the first company to host a completely virtual shareholder meeting, but it may very well be the largest. In 2011, just 21 companies used Broadridge Financial Solutions, a primary provider of online shareholder meeting technology, to hold virtual-only meetings. By 2014, that number had grown to 53.
Big companies, including Intel and Microsoft, have hosted what's known as hybrid meetings, in which a physical event is held but investors can also "attend" online. Yet major corporations have faced resistance when they've gone, or considered going, completely virtual in the past. Several years ago, Intel explored taking its meeting completely virtual and Procter & Gamble amended its bylaws to allow such meetings, only to backtrack after objections from shareholders. After Symantec hosted an online-only meeting in 2010 and heard complaints, it switched to a hybrid format.
Some shareholders and their advocates assert that online-only meetings will give companies even greater control over the questions that get asked, hinder relationship-building, and limit shareholders' face time with the CEO and the board. Keeping the meeting entirely virtual also means the company can guard against embarrassing protests or awkward face-offs between management and shareholders.
"Face time is still important," says Natasha Lamb, director of equity research and shareholder engagement for Arjuna Capital, which has filed shareholder proposals on issues including equal pay and carbon asset risks. While she supports the concept of hybrid meetings, "if you’re creating a virtual-only vacuum that becomes an echo chamber of management’s ideas, that’s a terrible idea."
Companies, meanwhile, say that hosting the meetings online saves money, especially in an era when annual meeting attendance is often sparse. Online meetings also have the potential to expand the number of shareholders who can engage. (While many companies now webcast their meetings, that only allows shareholders to view the event, not participate in it.)
An online meeting allows investors to vote online and present a shareholder proposal remotely, which they otherwise would not have been able to do without physically traveling to the site of the meeting. It also allows them to ask questions of the CEO or board remotely — even anonymously — which some may see as a benefit.
Whatever the upsides may be when the meeting is exclusively held online, shareholders could also face disadvantages. The Council of Institutional Investors, which counts state and union pension funds, endowment funds and nonprofit foundations as members, has a policy that supports online meeting attendance--but only when it's a supplement to a physical meeting, not a substitute.
With virtual-only meetings, says Amy Borrus, the group's deputy director, shareholders may not know how questions submitted electronically are being filtered or screened by the company before they're addressed. "It's different if you're there in person and people are raising their hands," she says. If it's online, "you don't know what you're missing, or what you may be missing."
Indeed, Broadridge casts a company's ability to view investor questions in advance as a selling point for its technology. Broadridge's Web site promotes the idea that companies "can privately view and manage shareholder questions without broadcasting to other attendees," and can invite investors to submit questions ahead of time, letting companies "better prepare and avoid surprises."
With this technology, investors typically type in their questions using the software. There's not yet a feature that makes a running list of incoming questions visible to everyone. Broadridge's vice president of strategic development, Cathy Conlon, said in an interview that companies can offer a call-in feature that allows investors to speak their questions, but few companies take advantage of it.
If an investor's question does get answered, but the investor is not happy with the response, any follow-up queries go to the bottom of the queue. The company then decides whether it wants to answer the follow-up before moving on.
An HP spokeswoman wrote in an emailed statement that hosting an online-only meeting will "allow for increased attendance and participation as well as increased communications with our stockholders via pre-meeting forums, surveys, and other materials," and that it will be less expensive. The company intends to post answers to questions that aren't addressed online after the meeting. Also, unlike many companies that only use audio for their online meetings, HP will broadcast video of CEO Whitman and the company's meeting participants.
Nell Minow, vice chair of ValueEdge Advisors, says she's not a fan of online-only meetings because investors should have the opportunity — however few of them actually use it — to look the CEO or board in the eye. "In the law, when you're talking about witnesses," she says, "there's a term known as 'demeanor evidence.' It means there are some things you can get only from being the same room and looking at them, and not what the camera chooses to show you."
Especially if there's no video, investors could miss out on telling moments. Minow recalls a shareholder meeting she attended years ago where she asked a question of the chairman of the audit committee. "The CEO said, 'No, we don't have questions addressed to the board at this annual meeting. I will answer all the questions.' Just the ability to look at the faces of the directors as he said that was worth the plane ticket."
Still, some investors are less concerned about completely virtual meetings, as long as they're done right. Ed Durkin, director of corporate affairs at the United Brotherhood of Carpenters pension funds, says that at one time, "the annual meeting was critically important because it was the only time you really put your eyes on an executive, or certainly the board." But now, he notes, "there’s a lot more engagement" over the course of the year.
Durkin also says that as long as standards are met, technology could largely replicate the experience of a shareholder meeting. Plus, because the question-and-answer session during regular meetings is often limited, online meetings could actually expand the number of questions that get asked.
Durkin has experienced some of the unique advantages of being there in person, though. He recalls one annual meeting where he presented a proposal and made enough of an impression on the chairman that the two later sat down and hammered out an agreement. "When you go and professionally present [a proposal], the chairman sees you, you have a chance to shake hands, he sees you don't have horns," Durkin says. Persuading the company's chairman to work with him on the proposal, he said, might not have happened had the meeting been virtual. "There's that human dynamic you might not replicate coming over a video screen."
Despite the growing corporate interest, and the investor support for at least some online component to such meetings, don't expect a big rush to purely virtual meetings for all companies. It seems unlikely, after all, that those whose shareholder meetings play a strong role in company culture will retire the events any time soon. Wal-Mart, for example, structures its annual meeting like a giant pep rally. And Berkshire Hathaway will host three days of events around its annual meeting this year, including a 5K run and a shareholder steak night.
David Yermack, a professor at New York University who has studied the location of shareholder meetings, says there's another reason that in-person annual meetings won't disappear too soon — long-standing rituals are hard to change without prompting doubts about the motives. "This is a 400-year-old corporate norm, where once a year you have to face the owners of the company and answer for what you’ve done."