Great change is a profound accelerator of innovation; before coronavirus, how many of us have heard bosses say ‘No, you can’t possibly work from home- the work won’t get done’. In 2020 they were proved wrong- resoundingly wrong! Because 2020, for all its claustrophobia and seclusion, has provided the space needed to usher in new modes of doing business.
The outbreak of Coronavirus has forced companies and regulatory bodies across the globe to think creatively about how to fulfil their AGM requirement at a time where, in many localities, gathering in large groups was unlawful. Put simply, 2020 forced a long-overdue change in how AGMs are conducted.
Factors restricting attendance have always impacted shareholder engagement but were never considered troublesome enough to address at an industry wide scale. Geography for instance, has been a consistent barrier to attendance, alongside issues of timetabling - not many people can spare three hours away from work on a weekday morning to attend an AGM. Whilst it was broadly accepted that online meetings made sense, legislative blocks alongside reluctance amongst organizations to be one of the early adopters have prevented meaningful change.
At the beginning of 2020, as businesses world-over shut their headquarters and governments enforced strict lockdown rules that did not allow people to gather, or as in Melbourne, leave their homes, the shift to virtual was no longer academic, it was a critical priority. Organizations, be they listed entities, member based organisations or the public sector had to think more imaginatively about how to fulfil their constitutional and legal requirements.
Beyond the obvious need to move online during a pandemic, businesses were for the first time free of three major cost implications associated with hosting a large in-person AGM, namely: time, money and most importantly, environmental damage.
The impact on the environment of a physical AGM, due to the lack of a viable alternative, has for years largely been overlooked. Whilst it’s impossible to accurately gauge the carbon footprint of a virtual AGM, it’s safe to say it is 100s of times less than a physical meeting, thanks to the absence of flights (both international and domestic), equipment freight, local transit of shareholders and catering. Questions pertaining to environmental issues were some of the most frequently asked questions at 2020 AGMs. It seems somewhat counterproductive if in 2021 shareholders were forced back to into increasing their carbon footprint in order to travel to a venue, to ask a question about protecting the environment.
In Australia, legislation allowing for virtual AGMs moved particularly quickly providing organizations the clarity needed to move forward. And the country is well deserving of its various international plaudits; early legislative decisions that allowed for AGMs to move to virtual meeting rooms enabled a positive evolution, led by best practice. Not only did this make for good governance but also gave participants confidence in the process.
However, detractors of the completely virtual AGM remain- sceptical of the platform’s transparency, and the apparent ease with which board members might dodge tough questions with the touch of a button. At Lumi, across the 100s of meetings we conducted in Australia last year, we saw the reverse happen. In virtual meetings (bar a few very early examples, which were quickly clamped down on by regulators) ignoring difficult questions just didn’t take place. There was moderation of questions certainly, but such that it provided the chair with clarity of the priorities of shareholders (editing out general comments, repetition or offensive language) rather than an easy ride. In reality, virtual is fundamentally no different to a physical meeting, where the Chair will often refuse to answer questions already addressed or direct ‘customer’ queries to be dealt with after the meeting.
If however shareholders or members are still concerned about the transparency of the platform, there are a couple of steps to consider to alleviate any concerns.
1.) Publish a full list of questions and answers after your AGMIn the run up to the meeting, we encourage businesses to communicate with shareholders about every step of the AGM planning process; this includes the post AGM activity. Providing your shareholders with a full list of questions and answers is a fantastic way of assuring transparency, dealing with any questions you were perhaps unable to answer during the meeting, and to provide a fulsome summary.
2.) Appoint an independent scrutineer or moderatorIf you would like to add another level of scrutiny to proceedings, you could appoint an independent scrutineer to ensure transparency. Just as a returning officer is engaged to verify the results of polls, a similar independent body could provide a report on the questions submitted and clarification (or where required criticism) of why some were not put to the meeting.
The importance of a moderator should not be understated. Effective moderation provides shareholders with the opportunity to question directors, whilst also preventing the meeting from losing momentum. Although there may be some scrutiny over which questions are answered, particularly where there is a duplication or popular interest from shareholders, however, as noted in Governance of Australia’s recent report, “it is appropriate that the moderator summarises those questions so that the chair responds to the issue in one response. However, in the interests of transparency, the chair should acknowledge that they have received multiple questions on the same issue and, rather than respond to each question individually, they are doing so on a collective basis. Similarly, if a chair chooses not to answer a specific question (by applying the same principles that they might do in an in-person meeting), they should acknowledge that is what they are doing and that someone will respond to that shareholder after the meeting.”
If your business is interested in making the transition to virtual meetings, and would like some guidance on how to get started, contact our expert team today.
