Online Annual Meetings Begin to Click

By JOANN S. LUBLIN

No investors raised their hands to grill the top brass during this year's annual meeting at Herman Miller Inc., nor buttonholed board members after it ended.

That's because the Oct. 10 session occurred solely in cyberspace—for the fifth straight year. The furniture maker stopped holding its annual meetings at pricey hotels in order to "reach a broader shareholder base" and save money, says Jeff Stutz, treasurer and vice president of investor relations at Herman Miller.

Bruce Macpherson

Since December 2009, 25 public companies have conducted at least one annual meeting only online, reports Broadridge Financial Solutions Inc., a major provider of such services.

Those with annual "e-meetings" included Warner Music Group Corp., Applied Minerals Inc. and Nutrisystem Inc.

But some critics challenge the value of sacrificing face-to-face accountability just to gain occasional increased participation, and lament the loss of personal interaction with executives and directors.

During the meetings, investors—who log into a website through a 12-digit control number linked to their brokerage accounts—vote and pose questions electronically. Some e-meetings are audio only; others include a video component where investors can see executives seated at a conference table. But few companies post investor queries online so other shareholders see what gets asked. Instead, officials running virtual meetings view posted questions and decide which to answer.

"You need to have give-and-take between shareholders and the board," says Glyn A. Holton, executive director of U.S. Proxy Exchange.

Last year, after Symantec Corp. became the first Fortune 500 company to decide to hold a virtual annual meeting, the investor advocacy group waged a letter-writing campaign against the computer-security concern.

We didn't want to deprive shareholders from participating at a physical annual meeting, says Anne Sheehan, head of corporate governance for the California State Teachers' Retirement System, a big public pension fund that joined the Symantec protest. Virtual meetings only make sense when investors take part "as fully as if they were there in person," Ms. Sheehan adds.

Symantec had embraced e-meetings because "an information-technology company should be leading the way toward most cost-effective solutions," says Robert S. "Steve" Miller, a Symantec board member. Directors agreed the idea would also "improve access by shareholders not in the area," adds Mr. Miller, the independent lead director until last month.

The September 2010 online session attracted 31 shareholders, up from only a handful at live meetings during the prior decade. "We historically have had in the range of four to six shareholders show up," then Chairman John W. Thompson said during the virtual meeting.

But stockholder Larry Dohrs, vice president of Newground Social Investment, was dismayed by what he thought was a low-tech performance during the e-meeting. He says he couldn't view submitted questions and officials toned down his query challenging cyberspace sessions. A Symantec spokeswoman declined to comment.

Symantec abandoned the virtual-only approach after just one meeting. The board didn't want to "go to war over this" because some investors preferred to look members in the eye at annual meetings, Mr. Miller says.

Just three non-employee stockholders showed up for this year's meeting, held Oct. 25 at Symantec's headquarters in Mountain View, Calif.

Before its 2007 switch, Herman Miller says it made sure major investors approved of virtual meetings. "We spoke with most of the top 10 shareholders," and none opposed the idea, says Mark Schurman, a company spokesman.

But the furniture manufacturer hasn't seen the expected surge in participation from the altered format. Only six investors not employed by Herman Miller attended the 15-minute online session this fall, matching the high point reached last year.

Still, the latest meeting's $3,000 cost was far less than the typical tab of $10,000 to $15,000 for in-person meetings between 2001 and 2006, Mr. Schurman says.

Even some critics expect virtual meetings to spread further if concerns offer certain safeguards. Mr. Holton of the U.S. Proxy Exchange, for instance, favors an electronic display of submitted questions so investors can endorse questions they want management to answer.

Broadridge will enhance its virtual-meeting service next year to let corporate clients display unfiltered questions, says Chuck Callan, its chief regulatory officer. (At typical live meetings, companies allow a brief question period during which officials recognize investors' raised hands.)

"We could see 100 companies do virtual meetings within five years," predicts Broc Romanek, editor of TheCorporateCounsel.net, an online newsletter which covers corporate governance issues.

However, live annual meetings probably won't disappear any time soon—especially at big businesses known for elaborate events. Warren Buffett's Berkshire Hathaway Inc. drew tens of thousands of investors to its 2011 meeting at an Omaha arena.

Johnson & Johnson also attracts big crowds. About 1,900 people typically attend annual meetings of the pharmaceutical giant, says Carol Goodrich, a spokeswoman.

Shareholders line up around 7:30 a.m., two hours before the session starts. They get coffee and Danish pastries beforehand and lunch sandwiches afterward. Everyone takes home goody bags filled with J&J products ranging from Listerine to baby shampoo.

Write to Joann S. Lublin at joann.lublin@wsj.com

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