The shareholder meeting marks one of the most important dates on a company’s annual calendar of events. It’s a day highlighted by corporate updates, board member elections, and shareholder resolutions. The meetings often give shareholders a chance to get up close and personal with management and directly ask them questions.
Duke Energy, one of the largest utility companies in the country, has decided it would rather keep its distance from its shareholders. On Thursday, Duke’s 2017 annual shareholder meeting will be conducted as a virtual event for the first time in the company’s history.
Duke, which is based in Charlotte, North Carolina, serves about 7.4 million electric customers and 1.5 million gas customers and owns about 52,700 megawatts of electricity-generating capacity. The company insists its decision to switch to an online-only format, after decades of in-person meetings, will lead to greater participation by a larger number of investors. However, corporate governance experts believe virtual meetings are being adopted by corporate boards that fear both adverse publicity and any attempt by shareholders to hold them accountable.
Companies generally are required to hold annual meetings of stockholders for the purpose of electing a new board of directors and addressing other business matters.
Activists interrupted Duke’s annual shareholder meeting last year to protest the company’s handling of its coal ash basins and to urge the company to adopt renewable energy at a faster pace. At Duke’s 2014 annual meeting, protesters took issue with a coal ash spill at the company’s retired Dan River coal-fired power plant in North Carolina.
“Transitioning to a virtual-only meeting allows Duke to fully control the content,” Natasha Lamb, managing partner and director of equity research and shareholder engagement at Arjuna Capital, told ThinkProgress. “One has to assume that any questions that are brought forward in a virtual format would be pre-screened.”
An in-person meeting exposes companies to questions that they may not want to answer or issues that they don’t want to address, Lamb said. But it is exactly those questions and issues that publicly traded companies need to hear and approach in a thoughtful manner, she suggested.
Duke plans to answer all questions, whether submitted in advance or during the meeting, company spokeswoman Catherine Butler said. “We will respond to as many questions as we can during the live webcast. Responses to questions we are unable to get to will be posted to our investor relations webpage,” she explained.
Steve Norris, an Asheville, North Carolina-area resident who owns a single share in the company, has protested at previous Duke annual meetings over coal ash and climate change issues. He said he has no doubt Duke decided to go virtual out of fear of renewed protests at its annual meeting.
Despite the switch to an online-only format, Norris, a member of Beyond Extreme Energy and the anti-pipeline group NC Alliance to Protect Our People and the Places We Live, said he and other activists plan to have “some fun” outside Duke’s headquarters in Charlotte during the virtual annual meeting.
When Duke announced the online-only format earlier this year, the Council of Institutional Investors, an association whose members include some of the largest pension funds in the United States, wrote a letter urging Duke’s board to reconsider the decision.
“We respectfully urge the board to take a ‘hybrid’ approach giving Duke Energy shareholders the option to either attend the meeting online or in-person,” Kenneth Bertsch, executive director of the Council of Institutional Investors, wrote in the letter.
Carl Hagberg, chairman of Carl T. Hagberg and Associates and an expert on shareholder communications, endorsed Duke’s decision to go online-only, citing the company’s promise to allow shareholders to watch executives provide a company update in real time, vote on shareholder proposals, and submit questions before and during the meeting.
Ideally, though, Hagberg prefers when companies hold an in-person meeting, with a webcast component. “A hybrid meeting is the gold standard for annual meetings. This is the way that companies should be moving,” he told ThinkProgress. “I’m a great believer in shareholder democracy, corporate transparency, and making sure investors are well-informed.”
Lamb agreed that a hybrid meeting is the best approach. “If they want to open access to more shareholders, then they should hold hybrid meetings where it’s a combination of in-person attendance and virtual participation,” she said.
But Duke countered that the hybrid approach would require trade-offs that would make the experience “less than optimal” for the in-person audience and the people who are watching the webcast or calling into the meeting, Butler said.
“Rather than being redundant and taking away from both of those audience’s experiences, we devoted our resources and focused our attention on making the webcast the most optimal experience,” she said.
Duke noted that moving to an online-only annual meeting was not unique and that a growing list of large companies, including ConocoPhillips, Sprint, HP, and Dynegy, had adopted the virtual format in recent years.
Although headquartered in Charlotte, Duke is incorporated in Delaware, where a 2000 change in law allowed companies to conduct their annual shareholder meetings remotely.
Certain government agencies also are moving away from conducting business in person with the apparent intent of avoiding activists. After protesters targeted a federal government auction for offshore oil and gas drilling last August, the Bureau of Ocean Energy Management (BOEM) decided to bring an end to the tradition of holding public auctions. The government plans to live-stream online all future offshore lease sales.
“We certainly did have to to take into consideration the safety of everyone, both attendees and our employees,” BOEM spokeswoman Caryl Fagot told the San Antonio Express-News of the decision to conduct the auction online.
Last May, the Federal Energy Regulatory Commission barred the public from its monthly meeting in Washington, D.C. after learning that climate and anti-fracking protesters planned to demonstrate at the agency’s headquarters. The agency’s commissioners voted unanimously to make the meeting “open to the public via webcast only.”
Butler disputed claims that Duke chose to make this year’s meeting online-only due to protests at previous annual meetings. “We have more than a million shareholders across the world and this provides an opportunity for many, many more shareholders to participate in the meeting,” she said.
Duke’s annual meeting webcast will feature Duke CEO Lynn Good, general counsel Julie Janson, and Michael Callahan, vice president of investor relations, together at Duke’s headquarters in Charlotte. The company’s board of directors and other top corporate managers will be participating online, according to Butler.
Duke’s use of an online-only format comes two days before Berkshire Hathaway Inc. holds its shareholder meeting. Even though the event will be live-streamed, thousands of people will be making their annual pilgrimage to Omaha, Nebraska for the opportunity to question Berkshire Hathaway CEO Warren Buffett in person.
The annual meeting landscape varies from company to company. Berkshire Hathaway’s annual meeting is a welcoming meeting with a carnival atmosphere where 30,000 people gather in a huge basketball arena, according to Lamb. “That’s at one end of the spectrum,” she said.
Although not on the scale of Berkshire Hathaway’s, Exxon Mobil also holds a celebratory-style annual meeting in a large symphony hall in Dallas where shareholders gather to offer input to management and meet with fellow shareholders, Lamb noted. In recent years, Exxon’s annual meeting also has attracted climate activists who have protested outside the meeting venue.
At the other end of the spectrum is investment bank Citigroup. At its 2017 meeting, the company served “lousy food” in a New York City auditorium that was sparsely populated, according to Lamb. “You could see that management and the board were visibly uncomfortable and looking forward to the meeting being over,” she said.
Lamb, whose firm helps individuals and foundations build sustainable investments, said this year’s meeting featured Native American youth climbing on stage to bang drums in protest of Citigroup’s investments in the Dakota Access Pipeline and Keystone XL Pipeline.
Citigroup officials did not create a welcoming environment for shareholders. But at least the company’s managers and board of directors were forced to hear the concerns of shareholders and the public by holding an in-person meeting, Lamb noted. The trend toward online-only annual meetings will create an “echo chamber” between a company’s board and its management where certain issues are ignored to the potential detriment of the company’s financial performance, Lamb explained.
“If they are locked up in that corporate ivory tower, how are they going to make the decisions that are right for all shareholders?” she said.
This article has been updated to include a comment from a Duke Energy spokeswoman about the company’s plans to answer questions during the meeting.