Virtual shareholder meetings: fortifying or felling corporate democracy: what companies need to know before ditching in-person forums.

• Author: Tahmincioglu, Eve
• Position: Cover story

Last year, four environmental advocates were escorted from Duke Energy's annual shareholder meeting after interrupting the utility's CEO Lynn Good.

And that was before environmental groups rallied outside the O.J. Miller Auditorium in Charlotte--where the meeting was held on May 5, 2016--protesting what they alleged was a cozy relationship between Good and Gov. Pat McCrory, a former Duke Energy employee. The protest included a mock wedding between the two as they donned air masks.

This year, things were much more quiet.

Why? Duke Energy opted to take its long-standing meeting completely virtual. There were no investors physically there to interrupt the CEO, who spoke to the camera during a one-hour tightly scripted talk at an undisclosed location. She answered shareholder questions that were submitted online and read to her by Michael Callahan, Duke's vice president, investor relations.

The decision to ditch the face-to-face meeting was made to "increase our shareholders' access to the meeting, making it easy and inexpensive for them to participate," said Steve Young, Duke Energy executive vice president and chief financial officer, in a statement announcing the move.

But it didn't sit well with shareholders of all sizes.

The California State Teachers 'Retirement System (CalSTRS), which owns 1.6 million shares of Duke Energy stock valued at $107 million, sent a letter to Duke prior to the meeting raising concerns about going all virtual, saying it would deny shareholders the "opportunity to interact with management and board members."

And Jim Warren, executive director of NC WARN--a Durham nonprofit that has been highly critical of the electric utility's practices --called the move "a deflection," in an interview with The Charlotte Observer. NC Warn owns two Duke Energy shares and seven shares are owned by organization employees.

Flirting with virtual

Given the age of Skype and other digital technologies which allow people to connect from far-flung locales, virtual meetings have become a mainstay in Corporate America, except when it comes to one very important company gathering --the shareholder meeting.

The annual gathering is not only a legal requirement, but also an age-old demonstration of corporate democracy in motion. That said, do shareholders have to be face to face with a company's top management and board of directors?

There are strong opinions on both sides of the virtual versus in-person debate.

Some directors and managers say these meetings can be an expensive exercise in futility with little benefit to the company or investors (see "Corprocracy in America ... RIP, "page 24). Some shareholders, especially those with smaller investments, see the meetings as a rare opportunity to confront the top brass and get unscripted answers.

Despite the differing views, virtual annual meetings are on the rise. According to research from Broadridge Financial Solutions, Inc., 155 public companies opted for virtual-only meetings last year, a steady increase that began in 2010.

"Although our technology service was provided in just 3% of shareholder meetings last year, the technology has become more accepted and adoption is on the rise," says Cathy Conlon, Vice President of Corporate Issuer Product and Strategy at Broadridge. "Greater numbers of companies and shareholders welcome the greater conveniences, cost savings, and enhanced communications features of virtual shareholder meetings."

Even though there's been an increase, the majority of corporations still opt for the in-person and hybrid models. "It's not a tsunami,"...