Notwithstanding the regulatory constraints, in the current environment virtual meetings appear to be an extremely beneficial tool for companies to use to present the company narrative to shareholders and other stakeholders. What then are the positives versus the negatives of companies going down the virtual meetings road?
Pete Fowler, managing director at virtual meetings provider Lumi UK, lists four ways in which virtual meetings can assist good corporate communications.
He explains: ‘The first is the inclusivity of shareholders and members – individuals who may not be able to attend in person due to the timing of the meeting, or for travel reasons, are more likely to attend a virtual AGM.’ Second, is what he categorises as representation: ‘An organisation is able to have more shareholders or members represented at the meeting, allowing for greater diversity of opinion to be presented.’
Third is the cost saving involved. ‘A virtual meeting can often save costs for an organisation, who might otherwise have to fly in board members from around the world to be in a single location, together with costs for venue hire, accommodation, refreshments for attendees.’ And lastly, is ‘engaging with a younger demographic – who expect digital options to be made available as standard.’
In the current circumstances virtual meetings offer real benefits, says David Shammai, cross border director at corporate governance advisory Morrow Sodali. ‘Across Europe, companies have been facing extreme travel and gathering restrictions, just as many of them were preparing for their annual general meetings. The use of a virtual formats for those meetings can help them mitigate the impact of these restrictions, while still ensuring holding them without or with little delay.’
He adds: ‘Even in normal circumstances, virtual meetings can have additional benefits. They allow a more international spread of outreach, which is an advantage given that in many markets we have seen the international shareholder base expanding. They are also conductive to more streamlined approach in other respects, so can support better voting quorum. Finally, for companies that have been making good use of this means, the quality of discussions at the meetings can be maintained if not enhanced.’
For Michael Kind, campaign manager at ShareAction, company engagement is central to the effectiveness of virtual meetings. ‘They allow shareholders to engage with boards directly at a moment when that would be impossible in-person,’ he says. ‘With boards making decisions that affect the lives of millions of workers and consumers, and the value of pension savings invested in company shares plummeting – this is a key time for shareholder voices to be heard. Aside from the current context – virtual meetings improve access for those who cannot usually attend AGMs, whether they are physically far away or have access needs.’
Virtual meeting disadvantages
But that is not to say that virtual meetings are not problematic. They can be ineffective for large numbers of attendees while scheduling can prove an issue for organisations with shareholders based across different time zones. Lumi’s Fowler points out, for example, that some critics believe a virtual AGM offers less of a forum for shareholders to hold the board to account.
Kind adds: ‘Purely virtual AGMs lose the in-person element of an AGM that allows shareholders to meet boards. Some shareholders are unfamiliar with technology and would prefer a physical meeting.’
Shammai says: ‘Shareholders’ ability to bring motions at the general meeting may be restricted for technical reasons in markets where this is possible, for example Germany. And some companies, and investors are concerned that placing the entire process of annual meeting online may entail additional cyber risks, as it increases vulnerabilities in this respect, for example by third parties with an interest to disrupt the process.’
Are there long term trends for companies using virtual meetings more? ‘Up until this year, we would say companies in Europe did not make much use of this,’ comments Shammai. ‘There was a strong opposition from institutional investors and retail shareholders alike. Proxy Advisers consequently were negative given the potential implications on shareholder rights in digital only meetings.’
But Fowler identifies a different development. ‘The trend towards the adoption of virtual meeting technology has certainly gathered pace over recent years, with it being more widely adopted in some regions compared to others – generally for legislative reasons,’ he says. ‘The technology allows for hybrid meetings – a combination of a physical meeting together with remote attendees – and this has been proving increasingly popular as shareholder engagement continues to be at the forefront of good corporate governance.’
Becoming the norm?
In addition, there has been much talk of many things changing as a result of Covid-19, so will the experience of the Coronavirus mean that virtual meetings become something closer to the norm after the pandemic is over?
‘There are many reasons that virtual or hybrid meetings should be the norm which will last beyond the immediate short term reason to use the technology,’ says Fowler. ‘Good corporate governance is increasingly focused on shareholder and employee engagement, and the technology offers the opportunity for as many shareholders to attend the meeting as possible. Companies that are opting to go virtual are currently seeing unprecedented attendance levels, which will hopefully give them confidence in the future.’
‘We think companies will recognise the benefit of holding virtual events – especially in regards to widening participation at AGMs,’ says Kind. ‘Post Covid-19 we are advocating for hybrid AGMs – which incorporate both an in-person and virtual element.’
And while Shammai has seen more interest from clients wanting to look into virtual meetings during the pandemic, he cautions whether this will really change. ‘Companies are cautious on whether they should be doing this,’ he says. ‘In some markets legislation on this is not clear or requires changes to Articles of Association. The concern that companies have is that they will be opening themselves to a legal challenge on the validity of the process. Where we’ve seen regulators stepping in to clarify the position, that has been helpful, for example in the UK, but still so far there was no state or regulatory intervention so the reality of what is allowed or not is unchanged.’
Morrow Sodali’s David Shammai offers his top tips on virtual meetings
1. Consider how to approach the issue of access to retail shareholders. Will it be done at the meeting itself? Or perhaps it should be supplemented by a firm commitment that a designated director will be made available for meetings later this year once restrictions are lifted.
2. Perhaps an obvious recommendation, the technical side of things is critical, choose your provider carefully!
3. There needs to be clear communication with institutional investors about the reasons behind the decision and how any expected concerns will be dealt with. In any case, virtual meetings, just like a physical annual general meeting, should not be seen as a substitute to an ongoing engagement programme with institutional investors and the largest shareholders.
4. Companies should consider very carefully how to approach Q&A at the meeting. Several risks are attached to this – limit the number of questions per investor or set a deadline for questions to arrive in advance of the meeting – all these procedural rules should be clearly set out in the general meeting invitation
5. Enabling real-time voting may leave you in the dark up until the end of the meeting.