HII co-filed a shareholder resolution introduced by an individual shareholder, Steve Nieman, a colleague of one of our friends, John Chevedden, who for years, has sponsored many good governance resolutions in an attempt to improve corporate conduct, including increasing transparency and disclosure.
Oversight of Corporate governance is controlled by state corporations’ codes, as individual states can create either a transparent or non-transparent environment regarding shareholder reporting and corporate disclosure. Over the years, attorneys representing corporate clients, have been successful in many state legislatures, including California, amending the state corporations code, permitting less disclosure, including, allowing exclusively virtual shareholder meetings, all conducted online, with almost no interchange, and certainly no face-to-face meeting between corporate management and directors and shareholders. It is another way that self-nominated directors can meet together in a remote and often, exotic location and eliminate any human interchange between them and corporate owners, or shareholders. It is now physically the separation of ownership from control.
Mr. Nieman’s shareholder resolution is an attempt to put to a halt Alaska Air Group’s (ALK) exclusive virtual shareholder meeting, initiated in 2016. HII co-filed this resolution so that owners can meet face-to-face with corporate management on an annual basis.
Not surprising, ALK’s management challenged the resolution, and the SEC allowed the company to omit the resolution from the proxy materials on the grounds of “ordinary business”. According to John Chevedden, the SEC also ruled similarly on other proposals to bring back live shareholder meetings.
Shareholder Resolution 2017
“In-Person Shareholder Meetings”
RESOLVED: Shareholders request that our Board adopt a corporate governance policy to initiate or restore in-person annual meetings and publicize this policy to investors.
Our management has adopted procedures allowing it to discontinue a Corporate America tradition – a physical stockholders meeting and “substitute” a virtual meeting – a fundamental change in the way management and shareholders relate.
Internet-only meetings should not be substituted for traditional in-person annual meetings. The tradition of in-person annual meetings plays an important role in holding management accountable to stockholders.
In contrast, online-only annual meetings could allow company management to control the questions and concerns that heard and manipulate the exchanges between shareowners and management. Face-to-face annual meetings allow for an unfiltered dialogue between shareholders and management. The Council of Institutional Investors, a coalition of America’s largest pension funds with portfolios exceeding $3 trillion, adopted a corporate governance guidelines stating, “Cyber meetings should only be a supplement to traditional in-person shareholder meetings, not a substitute.”
Additionally, in-person annual meetings are needed for these reasons:
• Annual meetings are one of the few opportunities for top management and the Board to interact directly, face-to-face, with a cross-section of their shareholders.
• Annual meetings provide for direct questions to be posed to the Chair of the Audit, Compensation or Governance Committees of the Board.
• While some underperforming managers can argue that eliminating face-to-face annual meetings can reduce costs, the investment in creating a physical space for shareholder meetings is money well spent.
• Dumping in-person meetings creates a “slippery-slope” to encourage the management of other companies to insulate themselves from shareholders. Imagine a CEO who wanted to downplay investor frustration over outrageous executive pay, dismal business decisions or questionable environmental practices.
• “Virtual” on-line meetings would be a harmful way to insulate management from shareholder interaction or to portray any opposition as trivial. Imagine if Wells Fargo had a virtual meeting after dumping CEO John Stumpf and investors wanted to attend an in-person meeting to discuss the recent fraud and steps to insure it didn’t happen again.
• In addition, if there was a major crisis with a company, a merger being proposed or a significant shareholder proposal, investors would want an in person stockholder meeting.