A significant shift has taken place in annual general meeting practice around the world, because of and following the outbreak of Covid-19.
AGMs are an important forum for corporate boards and management to communicate with shareholders and share constructive dialogue. Traditionally, it was a legal requirement in most markets for companies to meet physically with shareholders at least once a year.
However, the Covid pandemic caused many governments to enact emergency legislation allowing companies to conduct virtual-only AGMs. Shareholders pragmatically understood the necessity for these while there were limitations on gatherings for health and safety reasons and continue to be tolerant of the need for virtual meetings in ‘emergency’ situations.
But it must be recognised by both regulators and companies that this pragmatism comes at the expense of watered-down shareholder rights. Virtual meetings have significant limitations on shareholders’ ability to interact directly with boards and management, view materials presented at the meeting, ask unmoderated questions and make statements from the floor. This is particularly the case where contentious issues or proposals are under discussion.
We are no longer in an ‘emergency’ situation, meaning it is not necessary to restrict AGMs to a virtual format. The optimal approach is a hybrid meeting, which enables both in-person and virtual participation by shareholders. Purely virtual AGMs should only be held when there is no alternative—particularly for audio-only meetings, which limit non-verbal communication. If it is necessary to conduct a virtual-only AGM, the board should explain the reasons for this to shareholders ahead of the meeting.
All parties share an interest in ensuring AGMs are efficiently, democratically and securely run, to enable approval of resolutions affecting issues such as dividend proposals, share issuance authorisations, director elections and auditor appointments. If companies do not ensure an effective and inclusive AGM experience, investors are likely to vote against proposals to change constitutional documents, and/or vote against board directors, particularly those serving on governance committees.
How to get it right
Chapter 10 of the ICGN’s Global Governance Principles sets out the importance of an interactive and inclusive AGM experience, to enable shareholders to express their views in a democratic and equitable way.
Briefly summarised, key points for effective AGMs that respect and enable shareholder participation are:
The optimal AGM format is hybrid and virtual-only AGMs should only be held in an emergency situation.
The AGM date should be coordinated in advance with other company AGMs as far as possible to avoid a concentration of meeting dates in the same few days or weeks.
AGM materials should be published at least one month before the meeting (including the meeting format and procedures around registration, access, participant identification, shareholding verification, voting options and approach to questions), in English as well as a local language if companies benefit from global investments.
Reliable technology must be used to allow democratic, secure, and efficient access to the AGM for all participants.
Robust procedures to verify shareholder identification and level of shareholding must be established, ensuring all those eligible can attend the AGM and vote on resolutions.
Shareholder questions should be permitted both in advance and during the AGM, with adequate time allocated for discussion. The board and management should respond to all questions at the AGM itself, rather than following up by email, and ‘live’ questions should be unmoderated.
Shareholder proposals on the ballot or agreed in advance must be included and recognised on the AGM agenda, with adequate time for discussion.
Vote execution must be facilitated efficiently, securely, and accurately, with deadlines clearly disclosed; “share-blocking” or requirements for lengthy shareholding periods to gain the right to vote should be discouraged.
Voting results must be published promptly on the company website after the meeting, including the outcome (that is: votes for, against or abstained) and voting levels for each resolution.
AGM meeting minutes, including all proposals, all questions and answers, must be recorded and made available to all shareholders of the company.
ICGN’s position is that regulators should require companies to hold hybrid AGMs, allowing global investors to have the option of virtual or live participation. We also encourage regulators to ensure adequate consultation with shareholders (and other stakeholders) when changes to regulation or legislation regarding AGMs are being considered—particularly matters impacting shareholder rights.
AGMs are an opportunity for constructive dialogue between corporate boards, management, and shareholders. While virtual-only AGMs may enable business to be carried out, they cannot fulfil this function as effectively and inclusively as a hybrid meeting, which maximises participation in the interests of all parties.