The future of AGMs: physical or virtual?


    The Business Times, 11 January 2021

    THE year 2020 was a watershed year - one in which work, meetings and business in general went digital. The Covid-19 pandemic even forced annual general meetings (AGMs) online.

    The Asian Corporate Governance Association concluded in a recent study that the number of virtual meetings increased significantly in Asia, including in Singapore, Malaysia, India and Australia. In Canada, over 160 listed issuers adopted virtual technology for their 2020 AGMs. In Japan, 111 companies implemented virtual shareholder meetings.

    Regulatory authorities in Singapore fast-tracked legislation in April 2020 to allow listed companies to hold their AGMs virtually. Across the region, the adoption of remote meeting formats has played out, with physical meetings discouraged in most jurisdictions.

    But what will happen post-pandemic? Will issuers revert to the traditional physical format of meeting in a pre-arranged location?

    Physical shareholder meetings

    Face-to-face meetings facilitate a higher degree of interaction between shareholders, and the board and management. In addition, well-established procedures, familiar protocols and a secure environment are a safety net for many.

    But physical meetings can be expensive, requiring large venues with accompanying costs. And many investors with diversified portfolios may find it impractical to attend AGMs that bunch together in the calendar. Although mass vaccinations are nearly upon us, the pandemic continues to cast a long shadow.

    Virtual meetings

    One of the greatest advantages of the virtual meeting platform is unprecedented access. Shareholders (and even directors) all over the world, at a single click, can overcome geographical barriers and eliminate travel time and costs.

    Shareholder participation has soared. Computershare reported that overall attendance at AGMs in Australia increased by 36 per cent over the 2019/2020 reporting period.

    Voting is also mandated by poll rather than by a show of hands, which produces a more accurate reflection of the views of shareholders. Virtual proceedings are easily recorded and archived for future viewing, as well.

    The virtual format, however, falls short of completely replicating the real-time experience. There are issues with verification of shareholder identities, properly authenticated voting processes and the inevitable technical difficulties.

    Some have also criticised the restricted opportunities for "live" question-and-answer sessions and the cursory interaction between the board and shareholders.

    The practice of requiring shareholders to submit questions in advance may also mean that shareholders are called to vote on resolutions (by submitting their proxies ahead of the proxy cut-off) even before their questions are answered and published by the company.

    Shareholders may also find it difficult to move motions or react to "live" issues raised at the meeting in the absence of real-time interaction with the board and management.

    Hybrid meetings the new normal

    The Monetary Authority of Singapore and Singapore Exchange Regulation have said they are open to allowing hybrid or fully virtual shareholder meetings even after social distancing measures are eased - provided there is effective engagement of shareholders, proper verification of attendees, and accurate and secure voting processes.

    Most companies would welcome the extension of the legislative measures that permit them to conduct online meetings without having to undertake costly and time-consuming amendments to their constitutional documents.

    As companies and shareholders become more familiar with remote meeting formats, the acceptance of virtual supplements to physical meetings will increase.

    The availability of sophisticated electronic platforms will also provide enhanced virtual participation options and replicate more closely in-person shareholder meetings, with opportunities for real-time interaction and electronic voting.

    The hybrid meeting, which combines a core physical meeting with remote access, may well become the new gold standard - carrying the benefits of both physical and virtual meetings while avoiding the shortcomings of both formats.

    Such a format will, of course, bring its own challenges. The chairman of the meeting, with the assistance of the company secretary, will need to have the skills necessary to juggle and moderate questions that come from both the physical attendees and online participants.

    Will questions from remote participants, for example, be permitted to be asked only via the "chat" function in writing, or will shareholders be allowed to speak as if they were present physically?

    Where possible, boards should be encouraged to create formal rules of conduct and protocols to govern virtual or hybrid meetings to provide fairness and transparency in procedures - for example, how the company will queue or answer questions received virtually versus in person so that meetings can be run efficiently.

    Whichever format of meeting is ultimately adopted, companies will need to examine their shareholder base and the preferences of their investors.

    They will also have to consider the costs associated with combining a virtual component with a physical meeting, and the accessibility and integrity of their chosen technological platform.

    At the end of the day, boards should leverage technology to enfranchise their shareholders and extend their outreach to stakeholders.

    One thing is certain - advances in technology can be expected in the future to usher in a new era for hybrid meetings, with electronic meeting platforms made even easier to use, less costly and more widely accepted.

    The writer is vice-chairman of the Singapore Institute of Directors.