The third time is not the charm.
Canadian Securities Administrators, the national umbrella group of provincial and territorial regulators, has once again updated its guidance on virtual shareholder meetings as publicly listed companies prepare for proxy season. And once again, the CSA’s advice fails to protect investors adequately.
Although the CSA urges companies to do more to facilitate shareholder participation in virtual meetings – including by simplifying registration and ensuring investors can ask questions and offer feedback – its recommendations are not binding. The reality is companies still have too much latitude to silence shareholder dissent.
“It’s less prescriptive than I, frankly, think it should be,” said Emma Pullman, head of shareholder engagement at the British Columbia General Employees’ Union (BCGEU), an institutional investor.
This is the CSA’s third attempt at moral suasion. It published initial guidance on online meetings in 2020 at the onset of the pandemic as companies scrambled to make contingency plans for their annual meetings in response to public-health restrictions. The CSA then updated its advice in 2022 after receiving shareholder complaints, including from BCGEU.
As Ms. Pullman notes, the CSA’s latest guidance falls short because companies are not required to do anything specific even when it comes to providing disclosures about meetings. She also points out that while the CSA encourages corporations to “consult and follow accepted best practices relating to the conduct of virtual shareholder meetings,” it hasn’t established those best practices.
What’s more, there isn’t a way to ensure that every investor question is openly shared in the meeting, without edits by the company, said Kevin Thomas, chief executive of the Shareholder Association for Research and Education, a non-profit organization that represents institutional investors.
“And if we are going virtual, why can’t we make it a rule that those meeting recordings be made available, with transcripts, for review after the fact?” he added.
The CSA does nudge companies to consider “holding hybrid meetings to allow both in-person and virtual participation” but it does not require them to do so.
Some companies, though, are doing the right thing. Electronics company Celestica Inc., for instance, announced this week that it changed its plan to hold a virtual-only meeting and will instead use a hybrid format, saying it “welcomes the participation of shareholders who will be able to attend the meeting in-person.”
Investors of grocery retailer Metro Inc., meanwhile, recently rejected the company’s arguments that virtual-only meetings are preferable because they save costs and maximize shareholder participation. In late January, investors passed a shareholder resolution by the Mouvement d’éducation et de défense des actionnaires that pushed Metro to hold annual meetings in person and only use virtual meetings as a complement.
Metro is now evaluating its options for next year’s meeting. “No decision has yet been taken,” wrote spokeswoman Geneviève Grégoire in an e-mailed statement.
Part of the broader problem, however, is that annual general meetings fall outside the purview of securities regulators.
“As the conduct of shareholder meetings is primarily governed by corporate law and a reporting issuer’s organizing documents, the CSA is providing the updated guidance to assist reporting issuers in fulfilling their disclosure obligations under securities legislation and encourage adoption of practices that facilitate shareholder participation,” stated CSA spokeswoman Ilana Kelemen.
“We wanted to ensure broad distribution of this information to issuers in a timely manner in advance of the upcoming proxy season. The CSA will be monitoring the practice of virtual shareholder meetings, including reviewing disclosure in proxy-related materials.”
Unfortunately, shareholders still have little recourse, aside from costly litigation, if companies ignore the CSA guidelines.
Despite the purported benefits of modern technology, investors are still expressing concerns that virtual meetings do not offer experiences that approximate those of in-person gatherings.
That’s why BCGEU is circulating an investor letter on “responsible virtual meeting conduct.” Specifically, it calls on S&P/TSX 60 companies to outline their strategies for preserving shareholder participation at virtual meetings and for ensuring an online experience that is on par with in-person interactions.
The letter, which closes for signatures on March 15, already has the backing of large investors who collectively represent over $300-billion in assets under management.
“A lot of investors have been concerned about this,” Ms. Pullman said. “The conduct that is happening right now is actively undermining shareholder rights.”
That’s troubling because virtual-only shareholder meetings were originally envisioned as a contingency measure necessitated by the pandemic. But in the ensuing years, their use by corporations has become common practice.
In fact, 57 per cent of S&P/TSX 60 companies held virtual-only annual shareholder meetings during the 2023 proxy season, according to an analysis by Amandeep Sandhu of Sandhu ESG Law. That compares with 54 per cent of companies in 2020.
In 2019, 100 per cent of annual shareholder meetings held by S&P/TSX 60 companies were in-person gatherings, according to BCGEU. Although some of those companies did provide an audio or webcast, those do not meet the definition of a virtual meeting.
“The bottom line is that the AGM is for the shareholders, not management. It’s our meeting. The new guidance is welcome and the principles it espouses are good, but it needs to be even clearer or abuses will continue,” said Mr. Thomas.
He’s right.
Rita Trichur