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New York City Pension Funds to Adopt Policy Against Virtual-Only Shareholder Meetings

In a recent note, we discussed how virtual-only shareholder meetings have recently been increasing in popularity, but that investors and shareholder activists are also expressing increasingly skeptical views on their desirability.

More recently, New York City Comptroller Scott M. Stringer has added his voice to the chorus of those against virtual-only meetings, on the basis that they deprive shareholders of a “fundamental right, that, regardless of the number of shares they own, they can engage directly with management and directors — face-to-face — at least one-time per year.”

In addition to sending letters outlining his concerns to S&P 500 companies that have held virtual-only meetings, Comptroller Stringer has recommended that the trustees of the $170 billion New York City Pension Funds approve a new proxy guideline to discourage virtual-only meetings. If approved, the New York City Pension Funds would vote against all governance committee members of S&P 500 companies that hold virtual-only meetings in 2017 and would extend this voting policy to all US portfolio companies in 2018. S&P 500 companies holding virtual-only meetings in 2017 could avoid an “against” vote from governance committee members only if they commit in advance of their 2017 annual meeting to hold their 2018 annual meeting in person or as a hybrid (virtual and in-person) meeting. The Pension Funds’ trustees are expected to vote on the voting policy change in April 2017.

Virtual annual meetings offer many potential advantages to both companies and shareholders. However, in deciding whether to hold virtual-only shareholder meetings, companies should carefully manage their investor relations, bearing in mind that the views of influential investors with respect to virtual-only meetings are rapidly developing.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Eric Sibbitt, an O’Melveny partner licensed to practice law in California and New York, Shelly Heyduk, an O’Melveny partner licensed to practice law in California, and Paul Porter, an O'Melveny counsel licensed to practice law in California and New York contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted. 

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