Intel scraps online-only annual meeting

Investor outcry forces chip giant to rethink plans

When Intel first announced plans to move its annual shareholder meeting exclusively online, the company did not anticipate the shareholder backlash. ‘We thought it was going to be completely non-controversial. We just have local retirees come to the physical meeting,’ says Cary Klafter, Intel’s VP of legal and corporate affairs and corporate secretary.

Last year Intel, using software developed by Broadridge, was one of the first companies to allow shareholders to participate in the annual meeting by going online. The goal was not only to decrease cost, but also to promote greater shareholder participation. In 2009 more shareholders attended the meeting from their living rooms than in-person. Hoping to build on that success, in the fall of 2009 Intel announced plans to move its 2010 annual meeting exclusively online.

Some shareholders balked at the decision. Timothy Smith, senior VP of Walden Asset Management’s environmental, social and governance group, believes virtual meetings create a ‘disembodied experience’ for the shareholder. If you are alone at home or in your office, ‘how do you know for sure if other investors are also concerned about x or y?’ Smith asks.

Smith was broadly supportive of Intel’s use of the virtual meeting and online voting in combination with its physical meeting last year. His concern is that moving entirely online may lead to widespread adoption of virtual meetings at companies ‘that do not have the high standards of governance that exist at Intel.’ This, in his opinion, could be damaging to shareholder rights.

A shareholder resolution filed with Intel, including signatories from Walden Asset Management and United for a Fair Economy (UFE), states, ‘We believe the tradition of in-person annual meetings plays an important role in holding management accountable to stockholders. In contrast, online-only annual meetings could allow companies to control which questions and concerns are heard and manipulate the exchanges between shareowners and the company. Face-to-face annual meetings allow for an unfiltered dialogue between shareholders and management.’

The resolution also asks Intel to establish a corporate governance policy affirming the continuation of physical meetings. While Klafter understands shareholder concerns, he reminds investors that ‘it is the corporate governance philosophy and practices of individual corporations that determine if any tool, such as the web-only meeting, is used in a forward-looking manner or not. The tool itself is not inherently problematic and of course there have been examples of poor practices by issuers at live meetings.’

For the time being, however, Intel has acquiesced to shareholder pressure and agreed to hold off on its plan to conduct this year’s meeting exclusively online. Smith applauded Intel’s handling of the situation: ‘Intel could have challenged the resolution and to their credit they sought a win-win situation before that happened.’

Investors opposed to virtual meetings are expected to soon formally announce a Coalition to Preserve Shareholder Meetings. In the fall the coalition plans to host a conference to discuss best practices companies can adopt in order to protect shareholder rights during virtual meetings. Intel has agreed to participate in the conference. In the meantime, Klafter says Intel will continue to do the ‘best we can to effectively mimic the physical annual meeting on the web.’ He has even hinted that that he may have even found a solution to getting web participants a cup of coffee.

By Katie Feuer