General Motors Co.'s annual meeting last week lacked what usedto be an essential element: shareholders. For the first time, thecarmaker held the gathering virtually, answering questionsinvestors submitted online, joining companies like LululemonAthletica Inc., Netflix Inc., and Intel Corp. in stopping physicalevents.

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Not all investors were happy.

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John Chevedden, a shareholder activist, called on GM investorsto vote against the appointment of three directors in protest ofthe automaker's decision to ditch in-the-flesh gatherings.

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“An in-person annual meeting is a motivator of good performanceby management and directors,” Chevedden said in a filing. “Whowants to stand in front of a live audience and explain shrinkingsales, epic recalls, and loss of market share? It is so much easierto explain it to a microphone.”

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GM spokeswoman Juli Huston-Rough defended the practice. Onlinemeetings “provide better opportunity for more shareholders toparticipate, regardless of where they live,” she said in an emailedstatement. “For many shareholders, attending a live meeting isn'tfeasible because of geography or travel expense.”

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In the U.K., the Investment Association—a trade body thatrepresents portfolio managers who collectively oversee about $10trillion of assets—has said it doesn'tsupport virtual-only meetings. Lululemon's billionaire founder ChipWilson, the biggest individual shareholder, has complained that thecompany's switch to the format in 2016 thwarted his ability to askthe board uncomfortable questions.

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Still, the practice is becoming more prevalent.

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Broadridge Financial Solutions Inc., which offers firms aplatform to host online-only meetings, supported 257 such events in2018, up from 212 in 2017 and just one in 2009, when it introducedthe product. Proxy adviser Institutional Shareholder Services (ISS)is currently tracking 186 virtual-only meetings that have alreadyhappened or are scheduled for later this year.

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Supporters of virtual meetings say the cost savings can besignificant and allow shareholders worldwide to participate.

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“Companies aren't doing it to hide; they just want to make themeetings more useful,” said Cathy Conlon, head of corporate issuerstrategy at Broadridge. “It allows retail investors to have accessto the company. People complaining about virtual meetings aregenerally those who already have access to the company.”

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Marc Goldstein, head of U.S. research at ISS, said the mostinvestor-friendly solution would be a hybrid meeting combining alive event that's also carried online. For many firms, that defeatsthe purpose of making the virtual switch.

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U.S. shareholders who object to such shifts have littlerecourse. While companies that wish to make the switch fromphysical meetings have to put that to a shareholder vote in Britainand some other markets, there's no such requirement for most U.S.firms, according to Goldstein.

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For now, most companies haven't abandoned traditionalshareholder meetings, which give mom-and-pop investors a platformto voice their ideas and concerns. That can make for some awkwardmoments for executives. At Bombardier Inc.'s event in Montreal lastmonth, a shareholder who said he had held the stock for almost sixdecades asked why the plane and train maker, which is in the middleof a turnaround plan, hasn't paid a dividend for years whilerewarding top executives with “staggering” pay. His comments drewsome applause.

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But virtual-only meetings can also be awkward. At Lululemon'smeeting, Wilson submitted eight questions, most of which focused onwhether the board had deliberately ignored his questions atprevious gatherings. This time, the company offered answers to mostof his questions and still managed to wrap up the entire proceedingin about 20 minutes.

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— With assistance from David Welch andSandrine Rastello.

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Copyright 2019 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.

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