Recent developments in AGMs have seen greater participation by those who can’t be physically present – satellite relay, webcasting, e-voting, pre-registration of questions via internet and the EU’s new directive to extend shareholder rights.
Given the technology exists can we do away with the ‘live’ meeting altogether – is it practical and is it legal? Will the virtual meeting become reality?
It is our very clear understanding that it is currently not possible under law to replace the physical AGM with any kind of virtual or e-meeting. The current rules under the Companies Act require a company to hold a meeting and to give proper notice. The meeting is only quorate generally if two or more shareholders are present – or whatever the company’s articles state. So any comparison between physical and virtual AGMs is a non-starter for the moment – it’s not one or the other!
What has been evolving for some time is the use of technologies to extend the physical meeting to shareholders who are not present. This can be done using satellite relay or webcasting, either in real time or in delayed or stored transmission. In addition, we are also seeing the growth in cross-border and simultaneous meetings, which are particularly useful for organisations with a significant shareholding outside the listing country or where the company is listed on more than one exchange. But again, these are not ‘virtual meetings’ – they are an extension of the core, live meeting.
We’ve also seen the use of e-voting to supplement the long-standing option for those unable to attend the meeting of expressing voting preferences on resolutions either by proxy or by post. In our experience, and again in our understanding of the legal context, this can only be done prior to the live event – voting usually ceases 48 hours before the meeting opens. Shareholders register on-line using an identity number, and record their votes ahead of the meeting. No e-voting is possible during the meeting. Incidentally, the use of electronic voting pads at live meetings doesn’t constitute e-voting (it’s a separate development)!
In general we believe there are clear advantages to extending access to meetings beyond those who are able attend on the day. The meeting becomes more open and accessible. The company is seen to be communicating more widely with its shareholders. These considerations will assist companies in following the recommendations of the Combined Code on Corporate Governance to make ‘constructive use’ of the AGM. Also, institutional shareholders may be able to participate in the AGM more easily – as they are consistently encouraged to do – rather than, as is current for the most part, be noticeable by their absence.
We know that there is a current EU Commission draft directive on shareholders’ rights which is designed to set minimum standards for companies across the EU whose shares are traded on regulated markets. The draft includes rights to participate in meetings. It seems likely to us that this initiative will be adopted in due course by the Council of Ministers, and then the UK government will have the choice of whether, how and when to adopt the directive into UK law. But the timing of all this is uncertain – it seems likely to be years rather than months.
All this said, we do think that the virtual AGM will come. There are sound environmental reasons for businesses to minimise all the travelling and other impacts implicit in holding live meetings. In addition, it would be in line with the fast growing trend for businesses to communicate widely with their stakeholders through a variety of media. Companies use online technology increasingly to involve their stakeholders, and, in turn, stakeholders increasingly use the web to scrutinise any company in which they have an interest.
There are no technological barriers to the virtual meeting now. We think that the main practical consideration is the same as with live meetings – what is the meeting for? It is a forum for the company to report on the progress of the business, and for shareholders to ask questions and vote on the resolutions. So, it is important to manage the expectations of the participants. There is no guarantee that a potential questioner will be able to ask their question, or receive an answer which they consider satisfactory. Nor is the AGM the best forum for dealing with unhappy customers, whether they are shareholders or not.
A virtual meeting will need to be planned and managed just as a live one. What is the invitation process? How do you ensure only shareholders or their proxies are present? How do you filter out irrelevant or service questions? What is your follow-up process for those whose questions haven’t been posed or fully answered?
There are also some practical issues. The current rules are, entirely understandably, based on the chairman of the meeting being able to see the shareholders who are attending. She/he can see who wants to ask a question, and count the hands in a vote. Further, she/he can take the mood of the meeting and, either by making their own choice, or by asking those present, make a decision on, for example, how long the question session should be, and how long to devote to each questioner.
In an electronic environment, these issues will represent a challenge to AGM organisers and chairmen, but we’re sure they’ll be overcome. New protocols will be designed to ensure fairness and equality of access and outcome – and we already see potential guidelines for these in today’s moderated forums. This represents a clear opportunity for production companies (like Crown!) which have fully integrated digital and event capabilities and experience. Nevertheless, it’s clear that the law will have to be rewritten in order for electronic meetings to become fully viable – and persuasively attractive for public companies to embrace them fully.
Most of the above relates to the private shareholder’s role in the AGM. A final point relates to institutional investors and other professional analysts and stock watchers. This sector currently uses a mix of quarterly and other briefings, often remote – be it webcast, telephone or virtual – to access company information. So they use the technology, to some extent, now. But they will also always want private and confidential information. So we don’t see that - for them - virtual meetings will replace their other research processes, both formal and informal. The institutions live by the special information they have, and how they interpret it. We think that the quality and quantity of their access is unlikely to be much enhanced by their being able to send an email question to the chairman during a large, open, live meeting.
Crown’s history of General Meetings
Crown was founded in 1981. We devise, implement, and manage internal and external communications projects across a range of different media disciplines – live event, print, design, video and digital. We have undertaken projects for over 50 of The Times Top 100 FTSE companies, and we have the in-house expertise to provide consultancy and execution on communications projects right through from inception to evaluation.
We staged the first ever AGM of a privatised utility: BT in 1985 with 5000 shareholders attending the NEC. Since then we have worked with many significant organisations at different stages in their development. In total, we have produced 158 AGMs, EGMs and SGMs. Our regular clients include Anglo American, Bradford & Bingley, Gallaher, Old Mutual, Equitable Life and United Utilities.
We believe our experience of demutualisation meetings for such companies as the AA, Halifax, Norwich Union, Friends Provident and NPI, has given us particular insight into identifying the issues that make for successful management of the AGM. We believe this was an important factor in our being awarded the contract to produce Standard Life’s AGMs for 2005-2007 during the period of its intention to demutualise.
Back