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GOVERNANCE

NYC comptroller petitions against corporate ‘virtual-only’ annual meetings

New York City Comptroller Scott Stringer is asking trustees of the five pension funds in the New York City Retirement Systems to vote against directors on companies' governance committees if the companies hold “virtual-only meetings” — solely by remote communication such as online access.

“Some companies are indeed using technology to boost shareowner participation, which we support,” said Mr. Stringer, the fiduciary for the pension funds in the $169.8 billion New York City Retirement Systems, in a news release Sunday. “But it's disingenuous to say virtual-only meetings broaden access; they often create barriers rather than tie them down.” Mr. Stringer's office is still drafting the guidelines, and the recommendations are expected to be sent to the trustees of the five pension funds later this month, Michael Garland, assistant comptroller for corporate governance, said in an interview Monday. Each plan has an independent board.

Mr. Garland said the comptroller's office doesn't object to so-called hybrid annual meetings, in which company executives hold a live meeting but also allow participation through remote communication. “We were alarmed by the rapid raise in virtual-only meetings,” said Mr. Garland, adding that it's important for shareholders and corporate executives “to interact face to face” in a live meeting.

There were 155 virtual-only audio or video annual meetings last year, according to research by Broadridge Financial Solutions Inc. There were 90 in 2015 and 53 in 2014. Mr. Stringer's office has sent — or will send — letters to large corporations identified as planning virtual-only annual meeting this year, including Duke Energy Corp., Ford Motor Co., Intel Corp. and ConocoPhillips. The letters ask the companies to stop this practice and return to live meetings or allow hybrid meetings.

If the pension board trustees approve the comptroller's virtual-meeting proxy proposal, the respective pension funds this year will vote against all members of governance committee members among S&P 500 companies in which the funds hold stock, Mr. Garland said. The policy would be expanded to all companies for next year's annual meetings.

In a March 24 letter to Duke Energy, Mr. Garland outlined the retirement systems' objections to a virtual-only meeting scheduled for May 4, noting that the city pension funds own a total of 1.6 million shares worth approximately $131 million.

Virtual-only meetings “filter company exchanges with shareholders” and “cherry pick the shareowners that are allowed to ask questions,” Mr. Garland wrote. Such meetings “prevent shareowner proposal proponents from presenting their resolutions directly to boards and senior management.”

Duke Energy responded March 30, saying its virtual-only meeting will allow the company to “engage with more” shareholders.

Duke “plans to answer all questions from all shareholders either during the question and answer portion of the annual meeting, or in writing and posted online after the annual meeting for those questions which we do not have time to answer during the annual meeting itself,” said the letter from Michael Browning, the independent lead director, provided by the comptroller's office. “We also do not intend to filter the wording of questions,” said the letter.