U.S. activists complain that virtual shareholder meetings let companies silence them

By Jessica DiNapoli and Ross Kerber

NEW YORK/BOSTON (Reuters) – Justin Danhof has used annual shareholder meetings to question companies on social issues for the last nine years.

His conservative think tank, the National Center for Public Policy Research, owns just a few shares in each of about 150 companies and takes advantage of its shareholder status to grill executives on issues ranging from gay rights to boardroom diversity.

This year, Danhof often found himself ignored, as companies held their shareholder meetings remotely during the COVID-19 pandemic, and asked investors to submit their questions online. Danhof said his questions on topics such as companies’ dealings with China or restrictions on financing gun makers were answered in only 13 of the 27 virtual shareholder meetings he and his representatives attended.

“Companies used the crisis to set up question-and-answer sessions that are a joke,” Danhof said. His success rate was much higher when he could sit near a microphone or in a CEO’s line of sight during in-person gatherings, he added.

Danhof is not alone. Investors faced obstacles, such as not being able to ask questions or not having their inquiries addressed, about 55% of the time in a sample of 88 virtual shareholder meetings held this year and reviewed in a Hebrew University of Jerusalem study published this month.

The researchers did not provide such figures for in-person shareholder gatherings in previous years but estimated that this year’s virtual meetings had significantly increased the number of dodged questions.

To be sure, virtual shareholder meetings have been welcomed by many mom-and-pop investors, who would have otherwise had to travel to a company’s headquarters to attend amid the pandemic.

Broadridge Financial Solutions Inc, the top technology vendor to companies for these events, said it helped run 1,494 virtual shareholder meetings this year, up from 326 last year, preserving a key ritual in the corporate calendar.

Yet many activists focused on environmental, social and corporate governance issues say the digital format can make it hard for them to hold companies accountable, given that Wall Street’s big institutional investors get access to top executives all year long.

“Companies should not use the pandemic as a cover for silencing their investors,” New York State Comptroller Thomas DiNapoli, who administers the state’s roughly $194 billion pension fund, said in a statement to Reuters. He said he wanted companies to use virtual meetings as a supplement to in-person shareholder gatherings, not a replacement.

Questions avoided this year ranged from online auctioneer eBay Inc declining to name directors who did not attend its online meeting to drug maker AbbVie Inc avoiding an inquiry on whether it would raise the cost of drugs during the pandemic.

“As long-term investors, we were disappointed our question wasn’t answered by AbbVie,” said Kate Monahan, shareholder engagement manager at the Friends Fiduciary Corporation, which invests roughly $480 million based on religious Quaker values.

She said she also posted her question on social media to attract attention but has yet to receive an answer from AbbVie.

Abbvie did not respond to a request for comment. An eBay spokeswoman said the company’s shareholder meeting was well attended by its board, and that it focused on questions more relevant to its business “out of fairness to other shareholders.”

Shareholder advocacy groups, including the Council of Institutional Investors (CII), last month asked the U.S. Securities and Exchange Commission (SEC) to look into the issue, including companies avoiding questions or not allowing shareholders to speak during virtual meetings.

An SEC spokesman declined to comment. The securities regulator issued guidance in April instructing companies to be clear about how shareholders “can remotely access, participate in, and vote” in online meetings.

The New York State Common Retirement Fund, overseen by DiNapoli, voted against the re-election of directors sitting on the governance committees of AT&T Inc and Berkshire Hathaway Inc’s boards this year for restricting investor participation at their virtual meetings.

Berkshire Hathaway did not respond to requests for comment. An AT&T spokeswoman said via e-mail that its decision this year to tweak the format of its shareholder meeting, allowing the company to read comments on proxy proponents’ behalf, “lets us efficiently address the matters to be voted and then move on to additional content.”

A spokesman for the fund said it will vote against directors of companies that do not meet CII’s standards for virtual shareholder meetings.

Proxy advisory firm Glass, Lewis & Co, which many funds turn to for advice on how to cast their shareholder votes, is considering recommending against directors at companies that ran this year’s virtual meetings poorly, its head of research and engagement Aaron Bertinetti said.


The snubbing of the activists has not always been intentional. As the pandemic spread in the spring, some companies had to switch to virtual meetings with little notice, resulting in technical glitches.

“The technology is just catching up with the need to make virtual meetings the best in class,” said Lawrence Elbaum, a partner at law firm Vinson & Elkins LLP, who often works with companies challenged by activists. He added that investors can also contact companies through investor relations and by writing letters any day of the year.

Some activists argued, however, that public pressure on companies at shareholder meetings is more successful in triggering change. They pointed to oil major ExxonMobil Corp’s move in 2018 to provide investors with a report on the impact of climate change after shareholders won a high-profile vote at its annual meeting the previous year.

“Virtual meetings provide another tool for companies who don’t like dissent to shut it down,” said Doug Chia, the president of corporate governance consulting firm Soundboard Governance LLC.

(Reporting by Jessica DiNapoli in New York and Ross Kerber in Boston; Additional reporting by Svea Herbst-Bayliss in Boston; Editing by Greg Roumeliotis and Cynthia Osterman)

PG&E, owner of biggest U.S. power utility, files for bankruptcy

FILE PHOTO: PG&E crew work on power lines to repair damage caused by the Camp Fire in Paradise, California, U.S. November 21, 2018. REUTERS/Elijah Nouvelage/File Photo

By Subrat Patnaik

(Reuters) – Power provider PG&E Corp filed for voluntary Chapter 11 bankruptcy protection on Tuesday, succumbing to liabilities stemming from wildfires in Northern California in 2017 and 2018.

The owner of the biggest U.S. power utility has filed a motion seeking court approval for a $5.5 billion debtor-in-possession financing, it said in a statement.

PG&E listed assets of $71.39 billion and liabilities of $51.69 billion, in a court document filed in the U.S. Bankruptcy Court for the Northern District of California.

“Throughout this process, we are fully committed to enhancing our wildfire safety efforts, as well as helping restoration and rebuilding efforts across the communities impacted by the devastating Northern California wildfires,” PG&E interim Chief Executive Officer John Simon said.

The company said it intends to pay suppliers in full under normal terms for goods and services provided on or after the date of the Chapter 11 filing.

Separately, PG&E shareholder BlueMountain Capital Management LLC said it was “deeply disappointed” that the company’s board ignored calls from multiple parties to abandon its “reckless and irresponsible plan to file for bankruptcy.”

The investment firm said it would propose a slate of board directors no later than Feb. 21, and urged all PG&E stakeholders to support change at the company.

PG&E, which had a debt burden of more than $18 billion, said earlier this month it would need to pursue a court-supervised reorganization in the aftermath of the blazes, including November’s so-called Camp Fire.

The Camp Fire broke out on the morning of Nov. 8 near the mountain community of Paradise, sweeping through the town and killing at least 86 people, in the deadliest and most destructive wildfire in state history.

Reinsurance company Munich Re termed the Camp Fire as the world’s most expensive natural disaster of 2018 and earlier this month pegged the overall losses from it at $16.5 billion.

PG&E, which filed for bankruptcy once before in 2001, warned in November it could face “significant liability” in excess of its insurance coverage if its equipment was found to have caused the Camp Fire and other destructive wildfires.

Earlier this month, a state fire agency said PG&E equipment was not to blame for a 2017 wildfire in California’s wine country, but the company faces dozens of lawsuits from owners of homes and businesses that burned during that and other 2017 fires.

The San Francisco-based company provides electricity and natural gas to more than six million customers in Northern California. Last year, lawmakers gave it permission to raise rates to cover wildfire losses from 2017. But elected officials this month showed little appetite for new rate hikes or other maneuvers to prevent a bankruptcy filing.

(Reporting by Subrat Patnaik in Bengaluru and Jim Christie in San Francisco; Editing by Gopakumar Warrier and Saumyadeb Chakrabarty)

Facebook shareholders back proposal to remove Zuckerberg as chairman

Facebook's CEO Mark Zuckerberg listens to French President Emmanuel Macron after a family picture with guests of the "Tech for Good Summit" at the Elysee Palace in Paris, France, May 23, 2018. REUTERS/Charles Platiau/Pool

By Arjun Panchadar and Munsif Vengattil

(Reuters) – Several public funds that hold shares in Facebook Inc on Wednesday backed a proposal to remove Chief Executive Officer Mark Zuckerberg as chairman, saying the social media giant mishandled several high-profile scandals.

State treasurers from Illinois, Rhode Island and Pennsylvania, and New York City Comptroller Scott Stringer, co-filed the proposal. They joined hedge fund Trillium Asset Management, which bought it to the table in June.

The proposal, set to be voted on at Facebook’s annual shareholder meeting in May 2019, is asking the board to make the role of chair an independent position.

“Facebook plays an outsized role in our society and our economy. They have a social and financial responsibility to be transparent – that’s why we’re demanding independence and accountability in the company’s boardroom,” Stringer said.

Facebook declined to comment.

In 2017, a similar proposal to appoint an independent chair was voted down.

In opposing the proposal, Facebook said an independent chair could “cause uncertainty, confusion, and inefficiency in board and management function and relations”.

Zuckerberg has about 60 percent voting rights, according to a company filing in April.

The New York City Pension Funds owned about 4.5 million Facebook shares as of July 31, while Trillium held 53,000 shares.

The Pennsylvania Treasury held 38,737 shares and the Illinois Treasury owned 190,712 shares as of August.

Shares held by the Rhode Island Treasury were not immediately available.

(Reporting by Arjun Panchadar and Munsif Vengattil in Bengaluru; Editing by Bernard Orr and Sriraj Kalluvila)

CEO’s get 335 times what average worker makes

The Empire State Building's spire is shrouded in clouds in Manhattan, New York, U.S., May 3, 2016.

By Ross Kerber

BOSTON (Reuters) – Chief executive officers of S&P 500 companies on average made 335 times more money than the average rank-and-file worker last year, down from a multiple of 373 in 2014, according to a union study released on Tuesday.

The figures released annually by the AFL-CIO, the largest U.S. federation of labor unions, are likely to gain attention. Pay disparities, which have persisted despite a steady American economy that has reduced the joblessness rate to around 5 percent and raised wages somewhat, have fueled political debate.

The average production and non-supervisory worker made around $36,900 last year, up from roughly $36,000 in 2014, according to a statement from the AFL-CIO.

Meanwhile the average CEO of an S&P 500 company made $12.4 million last year, down from $13.5 million in 2014. An AFL-CIO spokeswoman said the lower average CEO compensation figure reflected how for many the present value of future pension benefits declined.

Union leaders said the figures showed how pay decisions do not favor the average worker. “The income inequality that exists in this country is a disgrace,” AFL-CIO President Richard Trumka said in a statement. “We must stop Wall Street CEOs from continuing to profit on the backs of working people.”

The high levels of executive pay have drawn criticism from both Democrat Hillary Clinton and Republican Donald Trump in the current U.S. presidential campaign.

Nonetheless, top shareholders have overwhelmingly supported management on executive compensation decisions, according to the advisory “say on pay” votes most public companies hold annually.

Starting in 2017, the U.S. Securities and Exchange Commission will require public companies to disclose the ratio of the pay of their CEO to the median compensation of their employees.

(Reporting by Ross Kerber; Editing by Lisa Von Ahn)