In recent weeks, directors of two of the region's top financial institutions amended their company's bylaws so that instead of gathering with shareholders over coffee and sweet rolls for the traditional annual meeting, the mingling could be done from a distance in cyberspace.
While neither of the companies has announced plans to actually hold a so-called virtual shareholders meeting, the move by PNC Financial Services Group and Bank of New York Mellon highlights a growing trend among public companies to reserve the right to ditch face-to-face meetings -- a step that corporate governance experts have found troubling.
Some two dozen states have rules on the books allowing virtual annual meetings. They include Pennsylvania, Ohio, West Virginia and Delaware, where roughly 50 percent of publicly traded companies in the U.S. are incorporated.
"Basically, we've made amendments that many other corporations have done, especially due to huge technology advances," said Ron Gruendl, a spokesman for BNY Mellon, which is headquartered in New York but incorporated in Delaware.
"Our plans are still to have the live meetings," he said, noting that the 2014 annual meeting is planned for April in New York City.
He said the amendment provided the flexibility to hold a virtual meeting "if the situation calls for it," such as in a "weather-related" event.
PNC spokeswoman Marcey Zwiebel said the Pittsburgh-based bank had not yet announced plans for next year's annual meeting. She said a virtual meeting would allow the company "to reach a wider audience of shareholders if the opportunity presents itself." She declined to elaborate.
So far, relatively few companies have embraced virtual annual meetings, either as an online option for shareholders to patch into a live meeting or as a strictly online affair. But the numbers are growing.
Broadridge Financial Solutions, the Lake Success, N.Y., company that introduced the online meeting technology in 2009, said 58 virtual shareholder meetings were conducted last year, with another 58 so far this year. About half of the meetings were virtual only.
The technology, which offers either audio-only virtual meetings or the addition of streaming video, provides secure access so only shareholders can cast votes and post questions online.
Proponents of virtual meetings say they are an efficient way to boost shareholder participation without the expense and inconvenience of traveling. And they note that meeting electronically makes more sense for some companies where shareholders rarely, if ever, show up.
Detractors -- while generally applauding virtual meetings as a supplement to a physical shareholders meeting -- consider them a poor substitute for face-to-face interaction and worry some companies could use them to duck tough questions or controversy.
The Council of Institutional Investors, a Washington, D.C.-based advocate for good corporate governance, issued a policy statement in 2010 denouncing virtual-only meetings.
"We think virtual technology has value, but that companies should incorporate it into shareholder meetings as a tool for broadening, not limiting, participation," said Amy Borrus, deputy director for the council.
Meetings in person foster better communication, she said. In addition, Ms. Borrus said, "Not all shareholders are comfortable in cyberspace."
At PNC and BNY Mellon, traditional annual shareholder meetings have hit some snags recently.
In April this year, protestors against the financing of mountain top coal mining descended on PNC's meeting at the August Wilson Center, Downtown. In 2012, BNY Mellon's meeting at the Downtown Omni William Penn was disrupted by several groups demonstrating against big executive pay packages.
This year, BNY Mellon moved its annual meeting to New York following four straight years in Pittsburgh, where it has maintained a large presence since merging with the old Pittsburgh-based Mellon Financial in 2007.
Earlier this month, in addition to voting to allow virtual meetings, BNY Mellon directors stripped a provision from the bylaws that required the company to hold its annual shareholders meeting in Pittsburgh at least once every three years.
Spokespeople for both BNY Mellon and PNC said the uproar at the recent annual meetings was not a factor in the decision to approve virtual meetings.
"It is in response to changing regulations and the availability of technology that would allow us to reach a broader shareholder audience," PNC's Ms. Zwiebel said.
Broadridge's senior vice president of regulatory affairs, Chuck Callan, said the technology has been helpful to many companies. "A large segment of users have meetings without controversy and the technology enables them to be held efficiently and with greater convenience to their shareholders," he said in an email.
An online demonstration video for Broadridge's virtual meeting technology touts the service as a way to contain escalating costs and improve how meetings are "conducted and controlled."
"You can know ahead of time what stockholders are thinking by inviting them to submit their questions before the meeting, enabling you to better prepare and avoid surprises," it says.
Companies also can use a "control dashboard" that only they can see to view all questions "and choose which ones to answer."
States have oversight over shareholder meetings, but there are few rules or guidelines for how they are conducted. For example, regulations don't require a question-and-answer session. And among the states that allow online meetings, none requires both audio and video streaming.
Last year, a working group that included Broadridge, shareholder activists and others developed a set of guidelines for companies holding virtual meetings.
Among other things, the group encouraged companies to display all "reasonable" questions submitted during the meeting and to provide a telephone connection as an additional means of asking questions.
In deciding whether to hold a virtual-only meeting, companies should consider a number of factors, the working group said, such as whether a controversial management or shareholder proposal was under consideration; whether the company was the target of "significant shareholder dissent"; and whether meetings typically were well attended or only attended by management.
Ms. Borrus of the Council of Institutional Investors had a simpler recommendation.
"It's not too much to ask directors to show up once a year at a location that many shareholders can reach, such as their headquarters city, to interact with the owners of the company they represent," she said.
Patricia Sabatini: firstname.lastname@example.org or 412-263-3066. First Published October 19, 2013 8:00 PM