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Prior to the pandemic, shareholder meetings were conducted based on a series of corporate policies, industry norms, and state and federal statutes.[3]<\/a>\u00a0 A shareholder meeting must be called on a regularly scheduled basis; if a shareholder meeting has not been held within a fifteen month timeframe, any shareholder who holds voting stock has the power to require the corporation to call an annual meeting.[4]<\/a>\u00a0 At the annual shareholder meeting, the only required matter of discussion is the election of new directors for the company; however, a number of other issues may also be raised for shareholder approval.[5]<\/a>\u00a0 Shareholders can either choose to vote in person or by sending a proxy to vote in their place to the shareholder meeting.[6]<\/a>\u00a0 One of the most important elements of the shareholder meeting is the need for the meeting to meet quorum in order for any votes to be taken.[7]<\/a>\u00a0 Under most statutes, a quorum is established when at least a majority of shares (50% plus one) is present, although the quorum requirement may be increased or decreased based on individual company\u2019s bylaws.[8]<\/a><\/p>\n <\/p>\n Because of both the importance and the requirement of annual shareholder meetings, corporations have had to adapt in a timely fashion to new models of gathering; indeed, prior to the pandemic, very few companies had any policies or guidelines for hosting virtual shareholder meetings in lieu of in-person gatherings.[9]<\/a>\u00a0 Generally, there have been three different models proposed to replace traditional all-in person meetings: 1) switching to a completely virtual meeting, 2) hold an in-person or hybrid form of an annual meeting, or 3) delay the annual meeting.[10]<\/a>\u00a0 For the option of switching to an entirely virtual format, corporations will need to review both the company\u2019s charter and bylaws as well as the state law in which the company is incorporated.[11]<\/a>\u00a0 For the large number of companies incorporated in Delaware, the Delaware General Corporation Law (DGCL) grants the board authority to institute a virtual shareholder meeting in the place of an in-person gathering.[12]<\/a> Additionally, California, Connecticut, Georgia, Massachusetts, New Jersey, New York, and North Carolina have issued either executive orders or passed emergency legislation permitting the implementation of virtual shareholder meetings during the state of emergency in their respective states or simply allowing for them with no definite end date.[13]<\/a>\u00a0 Several issues arise when converting to an all virtual setting, including selecting a service platform, coordinating presentations of shareholder proposals, and most importantly, determining how votes for directors and proposals will be collected before and during the meeting.[14]<\/a>\u00a0 The challenges for hybrid meetings include deciding what representatives from the c-suite and other executives will be physically present versus attending remotely, how to properly screen in-person attendees to ensure the safety of everyone present, and finding host buildings or locations that are equipped to conduct the shareholder meeting in a socially responsible manner.[15]<\/a> Finally, for companies who choose to simply delay their annual meeting, it is important for them to consult the bylaws to ensure that they are not bound to hold the meeting on a specific day; if so, a bylaw amendment may be required to allow for a delay to take place.[16]<\/a><\/p>\n <\/p>\n However, the decision to move shareholder meetings to a virtual format has not been without drawbacks.\u00a0 Meetings on average are lasting seven minutes shorter when contrasted with in-person shareholder meetings conducted in 2019; while not a significant amount of time, the reduction has left shareholders with less time to pose questions to corporate executives before taking votes on important issues for the company.[17]<\/a> Furthermore, only about 80% of United Kingdom companies were implementing electronic options for shareholders to be able to ask questions at all.[18]<\/a>\u00a0 These kind of restrictions continue to raise questions about the long-term viability of virtual meetings replacing in-person shareholder gatherings.<\/p>\n <\/p>\n [1]<\/a> Lynn S. Paine, COVID-19 is Rewriting the Rules of Corporate Governance,<\/em> Harvard Business Review (Oct. 6, 2020), https:\/\/hbr.org\/2020\/10\/covid-19-is-rewriting-the-rules-of-corporate-governance.<\/p>\n [2]<\/a> See generally <\/em>Liz Hoffman, Goldman\u2019s Pandemic Hot Streak Continues in Third Quarter,<\/em> The Wall St. Journal ( last updated Oct. 14, 2020, 4:07 PM), https:\/\/www.wsj.com\/articles\/goldman-sachss-third-quarter-profit-nearly-doubles-11602675770?mod=hp_lead_pos1; see generally <\/em>Hugh Son, JPMorgan Beats Analysts\u2019 Profit Estimate as the Bank Sets Aside Less for Loan Losses,<\/em> CNBC ( last updated Oct. 13, 2020, 12:20 PM), https:\/\/www.cnbc.com\/2020\/10\/13\/jpm-.html<\/p>\n [3]<\/a> Alan Palmiter et al., Business Organizations: A Contemporary Approach 400 (West Academic Publishing, 3RD ed. 2019).<\/p>\n [4]<\/a> Id.<\/em><\/p>\n [5]<\/a> Id. <\/em><\/p>\n [6]<\/a>\u00a0 Id.<\/em> at 401.<\/p>\n [7]<\/a> Id. <\/em><\/p>\n [8]<\/a> Id. <\/em><\/p>\n [9]<\/a> Lynn S. Paine, COVID-19 is Rewriting the Rules of Corporate Governance,<\/em> Harvard Business Review (Oct. 6, 2020), https:\/\/hbr.org\/2020\/10\/covid-19-is-rewriting-the-rules-of-corporate-governance.<\/p>\n [10]<\/a> Holly Gregory Et al., Considerations for Annual Shareholder Meetings in the Time of COVID-19,<\/em> Sidley-Austin LLP (April 8, 2020), https:\/\/www.sidley.com\/en\/insights\/newsupdates\/2020\/03\/annual-shareholder-meetings-in-the-time-of-covid19.<\/p>\n [11]<\/a> Id.<\/em><\/p>\n [12]<\/a> Del. Gen. Corp. Law \u00a7 211(a)(2) (2020).<\/p>\n [13]<\/a> Gregory, supra <\/em>note 11.<\/p>\n [14]<\/a> Id.<\/em><\/p>\n [15]<\/a> Id.<\/em><\/p>\n [16]<\/a> Id.<\/em><\/p>\n
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