Back the the Future? Reclaiming Shareholder Democracy Through Virtual Annual Meetings

Abstract

From demanding greater executive accountability to lobbying for social and environmental policies, shareholders today influence how managers run American companies. In corporate doctrine, the principal venue reserved for shareholders to exert their influence and engage with management and each other is the annual shareholders meeting. At one time the annual meeting was a vibrant forum for shareholder democracy and occasionally even a platform for debating pressing social issues. For decades, however, the role of the annual meeting in corporate governance has been in decline. Today’s annual meetings are largely pro forma: only a handful of shareholders attend the meeting and voting results are largely determined in advance. This Article explores how the integration of technology can resurrect the annual meeting as the deliberative touchstone of shareholder democracy it once was as well as open new avenues for engagement. The widespread use of virtual annual meetings in response to COVID-19 provides an opportunity to critically rethink and re-envision the practice and purpose of the annual meeting. If structured properly, virtual meetings can re-engage historically absent shareholder demographics while maintaining the efficiencies of proxy voting. Additionally, virtual meetings can serve as vehicle through which companies can begin to address ESG issues and heightened public expectations that companies will work toward meaningful engagement with their varied stakeholders. This Article makes three key contributions to the existing literature. First, it provides a detailed account of state reactions to COVID-19 and of the impact that the move to virtual meetings had on shareholder voting. Second, it provides a detailed account of how annual meetings have drifted away from their democratic function. Finally, this Article argues that technology can revive shareholder democracy and bolster ESG efforts through facilitating retail shareholder and corporate stakeholder engagement, and underscores how virtual meetings can meet these important goals.