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September 21, 2001
Shareowners Rally to Defeat Online Annual Meeting Provision in Massachusetts
    by Mark Thomsen

Online annual meetings viewed as reducing shareowners' and the public's ability to hold companies responsible for their actions.


Shareowner activists succeeded recently in getting Massachusetts state legislators to nix the provision of a bill that would have allowed companies to hold their annual meetings over the Internet. After some wrangling, a revised bill was passed by the Senate and has gone back to the House for approval.

"Our success points to the power of our collective action as shareholders, consumers and citizens and reminds us that when we are organized our democracy does indeed work," said Scott Klinger, Co-Director of the Responsible Wealth Project of United for a Fair Economy. Responsible Wealth was a leader in organizing the effort to have online annual meeting provision deleted.

The provision was stated as follows: "the board of directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication."

The bill, including this provision, had passed the Massachusetts House of Representatives in July with little publicity. When in late August the bill was taken up by the Senate for possible approval, it was noticed by Boston-based Neighborhood Assistance Corporation of America. That organization quickly notified other organizations with an interest in maintaining face-to-face shareowner meetings.

Proponents of the bill claimed online meetings would increase shareowner participation, particularly among those located a great distance from the meeting site. They also said online meetings would allow companies to save money. Politicians supporting the bill said they were also trying to make Massachusetts more business friendly and competitive with Delaware, currently the only state that allows online annual meetings.

A press conference was organized and held outside the office of Senate President Thomas Birmingham on August 23rd. Amy Domini, founder of Domini Social Investments, activists from other non-profits, as well as representatives from social investment firms Trillium Asset Management and Walden Asset Management emphatically stated that the bill would take away a fundamental right of stock ownership. The conference attracted media attention and was instrumental in persuading the Senate to take another look at the bill.

Two major backers of the bill were EMC (ticker: EMC) and the Associated Industries of Massachusetts. EMC, a manufacturer of data management and storage systems, is based in Hopkinton, Massachusetts. Over the two weeks after the press conference, opponents of the provision vied with EMC and Associated Industries for Senate support.

The shareowner activists were eventually victorious, with the state Senate passing a bill on September 6th that allows companies to broadcast annual meetings over the Internet, but still requires face-to-face meetings. The bill also allows companies to send proxy statements via the Internet to shareowners.

As online annual meetings require companies to have greater data storage abilities, EMC potentially could have profited from the bill in terms of increased business. But EMC may also have had an interest in being able to quell difficult questions from critical shareowners.

According to Stephanie Haug, Assistant Portfolio Manager at Walden Asset Management, EMC tried to do just that by changing the question and answer format at this year's annual meeting in May. Instead of allowing microphones in the audience, EMC asked shareowners to write their questions and submit them.

When it was apparent Walden's questions regarding diversity issues at EMC would not be chosen, Timothy Smith, Senior Vice President at Walden, had to storm the stage and ask his questions to EMC Executive Chairman Michael Ruettgers before Ruettgers could leave. Even though Walden has subsequently started a dialogue with EMC, the company still refuses to disclose its Equal Employment Opportunity data.

"The technology industry is expected to become one of the largest employers in the future, so diversity is a concern for social shareholders," explained Haug. "Other companies, like Intel, for example, openly disclose their Equal Employment Opportunity data."

This anecdote only reinforces that a face-to-face annual meeting is a critical right of stock ownership. Haug said there is an effort underway to lobby the state of Delaware to rescind the law allowing online annual meetings. Since the law was passed last year, no company registered in Delaware has tried to hold its annual meeting online. Shareowner activists want to ensure it stays that way.

 

 
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