The COVID-19 pandemic has thrown a wrench in a yearly tradition for publicly traded banks: the annual shareholder meeting.
The United States was struck by the coronavirus crisis in the spring and it may drag into the early summer. In addition to halting the economy and throwing bank operations into overdrive, stay-at-home orders and prohibitions on large gatherings have wreaked havoc on the tradition of the annual shareholder meeting. In response, banks are considering virtual options.
Under normal conditions, shareholders of First Bancorp in Damariscotta, Maine, would assemble at the Samoset Resort for an hourlong annual shareholder meeting followed by lobster rolls for lunch, says CFO Richard Elder. But like many states, Maine Governor Janet Mills issued executive orders in March closing nonessential businesses and implementing other social distancing practices. The $2 billion bank lost its venue at the same time as large gatherings were deemed unsafe.
John Spidi, a partner in the corporate practice group at Jones Walker, had bank clients that faced similar predicaments. One bank planned to hold their meeting at a restaurant that’s now closed, another at a hotel and a third in one of its own branches.
“We’ve had to scramble and figure out what our options were,” he says. “That became a little tricky because every state has different rules on these things.”
The U.S. Securities and Exchange Commission issued guidance permitting virtual meetings and allowing companies that had mailed out proxies to update them with a proxy amendment and a press release accessible on the website. But some states initially only permitted hybrid meetings that included an in-person component. Spidi says some of his clients weighed complying with the law against taking their chances and moving to a virtual meeting.
“That was not an approach that I was comfortable with at all,” he says. “I couldn’t recommend it. I was telling the client what the options were, and the clients were basically saying, ‘We’re going to take that risk. We’re not going to get people together.’”
Fortunately, governors have waived these in-person meeting requirements during public health emergencies, sparing his clients. And in Maine, First Bancorp discussed postponing the annual meeting, but encountered bylaw considerations. So they decided to move online.
Banks that have already distributed proxy materials calling their meetings may be in similar situations, Spidi says. Most states require an annual meeting to elect directors, which a bank could feasibly do up until the last day of the year. But most include their proxies with their annual reports from the year prior, which are typically mailed in the first quarter. An option for banks that haven’t sent out their proxy materials is to hold off on calling the meeting until after stay-at-home orders are lifted, he says.
To hold a virtual meeting, First Bancorp’s board needed to sign off on the shift and its basic procedures, though it did not need to update its bylaws. Spidi says other banks may need to call a board meeting to update their bylaws and permit a virtual meeting, and then file a notification with the SEC that the bylaws have been updated.
Elder says First Bancorp briefly considered hosting its own virtual meeting before running into issues around shareholder authentication and voting. They ultimately reached out to Broadridge Financial Solutions, which they use for transfer and proxy services, to organize the event.
Broadridge has offered virtual shareholder meetings for a decade and has seen slow but steady pickup in companies electing the approach, says Cathy Conlon, Broadridge’s head of corporate issuer strategy and product management. Unsurprisingly, demand for virtual meetings has skyrocketed this year, from 326 companies last year 1,500 this year (and counting).
Beyond pandemics, virtual or hybrid meetings make it easier for shareholders to participate, especially if disability, availability or geography is a constraint. The meetings are similar to an earnings call for executives, which shareholders can access through a web address with no required installation or downloads.
“The technology is fairly straightforward,” Conlon says. “This whole situation will allow more and more companies to feel really confident [about virtual meetings], because they’re getting used to this being a virtual world.”
First Bancorp will conduct its first, and potentially only, virtual annual meeting on April 29. Elder says executives have joked about not returning to the resort after the pandemic ends, but adds they might consider a hybrid approach in the future that marries the virtual approach with the lobster roll lunch.
“I think you’ve got to think outside of the box, be open to new ideas and be willing to implement them,” he says. “This just shows when forced to make a change, you can do it.”