On November 27, 2017, Governor Walker signed an amendment to the Wisconsin Business Corporation Law (the WBCL) to permit companies that are incorporated in Wisconsin to hold virtual shareholder meetings. The WBCL previously required Wisconsin corporations to hold in-person shareholder meetings. Wisconsin now joins a significant number of other states in allowing virtual shareholder meetings. Possible benefits of virtual meetings that apply to both corporations and shareholders include increased shareholder attendance and engagement, more convenience, and decreased costs.
The New Statute
The WBCL now provides that a corporation’s board of directors may allow shareholders not physically present at a shareholders’ meeting to participate in the meeting by means of remote communication and to be considered to be present in person and to vote at the meeting. In order to avail itself to using this virtual meeting option, the corporation must:
(1) have implemented reasonable measures to verify that each person considered to be present and permitted to vote at the meeting by means of remote communication is a shareholder;
(2) have implemented reasonable measures to provide shareholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the shareholders, including an opportunity to read or hear the proceedings of the meeting concurrently with the proceedings; and
(3) maintain a record of voting or action by shareholders by means of remote communication. Additionally, the WBCL now permits a corporation’s bylaws to authorize the board of directors to determine that a shareholder meeting may be held solely by means of remote communication (i.e., a virtual-only meeting).
Potential Advantages of Virtual Shareholder Meetings
Virtual shareholder meetings offer many potential benefits to both shareholders and companies, including the following:
- The ability to improve access to the meeting and increase shareholder participation levels, since shareholders may be more likely to log on to a virtual meeting than they are to attend in person.
- A potentially better forum for shareholder questions. Shareholders may be more likely to ask questions online than in person. From a company perspective, if questions can be submitted and reviewed in advance, there is more time to consider thoughtful responses that more fully address the shareholder’s question.
- Efficiencies, including potential cost and time savings if a physical meeting is not held. For example, officers and directors would not need to travel to the meeting location unless board meetings were being held in connection with the shareholder meeting.
Potential Drawbacks of Virtual Shareholder Meetings
Corporations should also weigh the potential drawbacks to holding a virtual-only meeting. Some institutional investors and prominent individual shareholder activists have expressed concerns about or stated their disapproval of virtual-only meetings. As such, corporations holding virtual-only meetings should be ready to face possible increased shareholder activism such as votes against incumbent directors on board committees recommending virtual-only meetings or shareholder proposals to require physical meetings. However, if attendance at a company's annual meeting was typically low and it did not have much activism previously, it appears to be unlikely that there would be an uptick solely due to holding a virtual-only meeting.
Early adopters should also consider the risk that they might be viewed as insulating management from shareholder interaction. Critics state that virtual-only meetings deprive shareholders of the opportunity to meet with company representatives face to face. Additionally, shareholder advocates have raised concerns that questions submitted online could be prioritized, rephrased, or ignored.
Lastly, although virtual meeting platforms are widely used, there is always potential for technical glitches with regard to streaming the meeting and voting. Corporations should have procedures in place to deal with dropped phone calls or internet issues, particularly where shareholder votes are being solicited.
Quarles & Brady Thoughts
Public companies should consider discussing virtual shareholder meetings with their large institutional investors in advance of scheduling one. Although many activists have expressed their opposition to holding virtual meetings in place of physical meetings, many other institutional investors do not appear to have a strong preference for physical meetings, particularly for uncontested annual meetings. Presumably these institutional investors understand the costs associated with holding physical meetings when relatively few shareholders attend and where only routine matters are under consideration.
Corporations should also be prepared to comply with evolving proxy advisory firm policies regarding virtual-only meetings. For example, Glass Lewis recently announced that its 2018 proxy voting guidelines include a phased policy on virtual-only shareholder meetings, which beginning in 2019 will hold governance committees accountable if shareholders are not offered the same rights and opportunities to participate as at a physical meeting.
In addition, a company seeking to conduct a virtual meeting would need to ensure that its governing documents permit virtual meetings. This may mean amending the bylaws to specifically permit the board of directors to determine that a shareholder meeting will be held solely by means of remote communication or with remote communication as a supplement to a physical meeting. The corporation will also need to comply with the applicable statutory requirements related to the availability of the shareholders' list and meeting notice requirements.
The full text of the law may be reviewed online here.