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

61 Pages Posted: 27 Aug 2020 Last revised: 28 Aug 2020

See all articles by Yaron Nili

Yaron Nili

University of Wisconsin Law School

Megan W Shaner

University of Oklahoma College of Law

Date Written: August 26, 2020

Abstract

From demanding greater executive accountability to lobbying for social and environmental policies, shareholders today influence how managers run American corporations. In theory, shareholders exert that influence through the annual meeting: a forum where any shareholder, large or small, can speak their mind, engage with the corporation’s directors and managers, and influence each other. But today’s annual meetings, where a widely diffused group of owners often vote by proxy, are largely pro forma: only handful of shareholders attend the meeting and voting results are largely determined prior to the meeting. In many cases, this leaves Main Street investors’ voice unspoken for.

But modern technology has the potential to resurrect the annual meeting as the deliberative convocation and touchstone of shareholder democracy it once was. COVID-19 has forced most American corporations to hold their annual meetings virtually. Virtual meetings allow shareholders to attend meetings at a low cost, holding the promise of re-engaging retail shareholders in corporate governance. If structured properly, virtual meetings can reinvigorate the annual meeting, reviving shareholder democracy while maintaining the efficiency benefits of proxy voting.

The Article makes three key contributions to the existing literature. First, using a comprehensive hand collected dataset of state reactions to COVID-19 and of all annual meetings held between March 11 and June 30, 2020, it offers a detailed empirical account of the impact that COVID-19 and the move to virtual annual meetings had on shareholder voting. Second, it uses the context of COVID-19 to show how modern-day annual meetings have drifted away from its democratic function. Finally, the Article argues that technology can revive the shareholder democracy goals of annual meetings, and underscores how virtual meetings can meet that important goal.

Keywords: Shareholders, Corporate Law, Virtual Meetings, Corporate Democracy, Covid-19, Main Street Investors

JEL Classification: K10, K22

Suggested Citation

Nili, Yaron and Shaner, Megan, Back to the Future? Reclaiming Shareholder Democracy Through Virtual Annual Meetings (August 26, 2020). Univ. of Wisconsin Legal Studies Research Paper No. 1606, Available at SSRN: https://ssrn.com/abstract=3681578 or http://dx.doi.org/10.2139/ssrn.3681578

Yaron Nili (Contact Author)

University of Wisconsin Law School ( email )

975 Bascom Mall
Madison, WI 53706
United States

Megan Shaner

University of Oklahoma College of Law ( email )

300 Timberdell Road
Norman, OK 73019
United States
405-325-6619 (Phone)

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