Virtual certainty: online AGMs
The approach of the annual general meeting can give even the most hardened IRO a dreaded sense of déjà vu as companies face the logistical headache of the same old persnickety shareholders returning year after year with the same old gripes.
Imagine, then, how much simpler things would be if you didn’t have to find a venue, cater the event or spend all that money. A virtual meeting would allow investors to log on to their computers, watch the presentations, and vote and ask questions live.
Live electronic AGM voting is not yet facilitated by law in many parts of the world, but it is a legal possibility in countries such as Denmark. The Danes have had rules allowing completely virtual AGMs for the past five years, and firms are starting to offer the services that would let issuers host meetings entirely in cyberspace. Companies in Denmark and elsewhere already do partial electronic general meetings, which combine virtual and physical elements.
An Icelandic firm recently managed a first when it staged the country’s first partial virtual meeting but, as yet, no one has been brazen enough to host an entirely virtual meeting where investors all log on and participate remotely.
These types of virtual meeting are distinguished from the kind already conducted by certain firms with a dual listing. Royal Dutch Shell, for example, adopts a dual format, with directors in The Hague broadcasting to a roomful of shareholders in the UK. The audience watching in the UK can participate, vote and ask questions in real time – but investors still have to make the annual pilgrimage to a conventional, physical meeting room.
Ahead of time
Although it would mean giving up free sandwiches, virtual AGMs hold some benefits for shareholders. As most investors vote by proxy with their votes cast and counted before the meeting, agenda items at conventional AGMs are largely predetermined. ‘This is a disadvantage: it prevents any new information coming out at the meeting because the votes have already been decided,’ notes Michelle Edkins, managing director of Governance for Owners, the proxy advisory group.
A chance to participate live could promote investor activism by keeping the debate going right up until the end of the meeting, Edkins believes. ‘I think there are advantages to being able to participate and vote online as if you were at the meeting,’ she says.
Johnnie Bloch Jensen, CEO of Danish IR provider Investor Relations Services, thinks the virtual AGM is a natural progression. ‘In five years the majority of listed firms will host virtual AGMs,’ he predicts. ‘The cost of the annual meeting remains very high, and virtual meetings would be substantially cheaper.’
Despite a lack of regulatory infrastructure in Norway, the idea seems to be catching on there, too. ‘Norwegian legislation does not permit electronic voting but the rules are about to change,’ explains Herlaug Louise Barkli, IRO at StatoilHydro in Norway. Her company webcasts its AGMs to help overcome the geographical hurdles associated with having a large part of its investor base outside the country and she hopes Norway will follow the example set by others. ‘Our company policy is that we will make use of the technology as soon as the legislation allows it, but I think it will take time,’ Barkli says.
Loss of face-to-face time
Virtual meetings may not be entirely conducive to shareholder democracy, however, and Edkins, representing the investor camp, has mixed views. ‘While it’s a valuable benefit that people can join in remotely, there is merit to having the directors in a public place, face to face with private shareholders, employee shareholders and institutions,’ she explains.
Edkins concedes that it would be good to let shareholders send questions by email in advance and on the day of the meeting, but she worries about reduced levels of director accountability. ‘And if you’re questioning remotely – practically anonymously – you might be less responsible about the kinds of questions you ask,’ she notes. ‘You risk turning the AGM into a bulletin-board discussion.’
Edkins cautions against taking the concept of the virtual meeting to the extreme. ‘I’m very much in favor of using technology to improve voter participation, but I would be wary about doing away with the physical meeting altogether,’ she says.
Clearly some of the technologies associated with virtual meetings could aid shareholder participation, even if companies don’t go the whole hog and hold the AGM entirely in cyberspace. Even strong supporters of the futuristic format will readily admit the virtual AGM isn’t for everyone. In the short term, small companies and firms with a technological or innovative profile are expected to be the main beneficiaries of early adoption.
Fresh technological advances that allow meeting participants access to higher levels of security are continually being made in this area, making the virtual AGM a more workable option for many more companies. For now, however, the question remains as to whether more regulators will stretch to allow live electronic proxy voting. If more countries follow Denmark’s progressive example, AGMs could look very different in years to come.