Reason for an Annual Meeting?

For U.S. public companies, shareholder meetings are required by both state corporate laws and, for listed companies, stock exchange rules, as well as company charters and by-laws. Similar regulatory regimes apply for companies listed in other markets.

The immediate purpose of these annual meetings is for shareholders to vote on the election of the board of directors. The board oversees management and the company’s strategic direction on behalf of shareholders, and director elections provide shareholders with an opportunity to hold them accountable. Only shareholders as of the “record date”, usually set 10-60 days ahead of the meeting, are eligible to vote.

While most strategic and operational decisions are delegated to the board and management, certain other matters can come to a shareholder vote at the annual meeting. Typical agenda items proposed by management include:

  • appointing an accounting firm to audit the company’s financial records,
  • approval of a dividend distribution, or
  • an advisory vote on the company’s executive compensation program, often referred to as “Say on Pay”.

Most voting items on the agenda are proposed by management. However, shareholders who meet certain ownership requirements (in the United States, they must hold 1% or $2,000 of a company’s shares) have the right to submit a proposal for inclusion on a company’s ballot. Shareholder proposals may request the adoption of specific practices or the provision of additional disclosure; they typically focus on company-specific rules and bylaws, or environmental, social and governance (ESG) topics such as the company’s approach to climate change, board diversity, or human capital management.

Meeting Disclosure Requirements

The majority of institutional investors vote their shares in advance of the meeting, filling out a form that allows their votes to be registered by proxy. This practice is why many of the regulations for public company meetings are referred to as “proxy rules”, and why the documentation that companies are required to disclose includes a “proxy card” and “proxy statement”.

Proxy & Proxy Cards

These documents provide background on the proposals up for vote (the proxy statement) and a means for shareholders to vote (the proxy card). Proxy statements and cards have filing requirements. They must be distributed to eligible shareholders and made publicly and freely available in advance of the meeting. Companies have the option of delivering physical copies to shareholders or delivering the documents electronically under the “notice only” option. Most companies opt for the notice only option, which results in the electronic documents being distributed and filed on both the SEC’s online filing system, EDGAR, and one additional website (usually the company’s own website) at least 40 days before the meeting.

Annual Reports

While the annual report is not itself part of the proxy-related disclosure, it is typically published in advance of the meeting and delivered to shareholders along with the proxy statement. Most U.S. companies disclose their annual report via the Form 10-K. This document includes financial statements for the year under review along with an overview of company strategy, biographical information about the named executive officers and board of directors, and details of their compensation.

Special Considerations for Shareholder Proposals

Where shareholders have submitted a proposal, companies may either seek to exclude the proposal from the meeting agenda or agree to include it. If the proposal is included, management may either recommend in favor of it or include an opposition statement within the proxy statement.

Whereas both sides can provide their perspective in the proxy statement, the proxy card itself should use strictly neutral language. Each agenda item, including those submitted by shareholders, should be accurately described with titles and descriptions that are consistent with the proxy statement.

Post Meeting Requirements

Organizations need to issue a Form 8-K announcement of the number of votes that were cast for, against, and withheld for each matter in question within four business days of the annual meeting. In most cases, companies issue press releases with this information immediately following the meeting.

What Goes on During an Annual Meeting?

While most institutions vote in advance, many still choose to attend the meeting itself, which can provide an opportunity for dialogue and engagement. The meeting’s format will vary from company to company, but they are typically procedural in nature. The board and management present the financial results and lead a brief discussion of the specific items on the agenda, often lasting only a few minutes. While not required, it is best practice to provide shareholders an opportunity ask questions on the agenda, and on the company’s broader performance and strategy. Refreshments, including sandwiches, may be served.