30 July 2020

Assessment of Virtual AGMs — Must try harder!

BEN REBBECK, EXECUTIVE DIRECTOR


As the repercussions of the COVID pandemic started to impact the corporate sector ASIC, the Australian corporate regulator, following advice and prompting from their foreign counterparts, allowed Australian listed companies to hold fully virtual Annual General Meetings.

ASIC’s pathway to enable virtual AGMs, as they were the first to admit, was far from perfect, relying on a ‘No Action’ position for rapid implementation rather than Waivers or legislative change. Nevertheless, there was a lot to look forward to when the virtual AGM was given the green light with a fairly broad leeway for implementation including a hands-off regulator providing clear and simple guidance; an abundance of readily available and low cost technological options; and vastly greater accessibility for shareholders. Indeed, it looked like the scene was set for an explosion of innovation to ultimately deliver improved shareholder participation in AGMs in Australia. Did we see this in the first round of test case virtual AGMs? No, not really. In fact, I’m reminded of the rather charitable comment my 8th grade woodwork teacher wrote on my report card “Must try harder!”

The Positives

First, it has to be acknowledged that for the overwhelming majority of December 2019 and March 2020 reporters who recently utilised virtual/hybrid AGMs, these were their first ever formal online shareholder meetings. Additionally, the broader Australian corporate sector has little to no experience with formal online shareholder engagement. So both internal and external expertise and support structures for virtual AGMs either did not exist or were very limited.

It would be fair to say that perfection in execution under these circumstances was not a bar that anyone was setting for this exercise. Keeping the show on the road in the middle of a challenging pandemic was an enormous achievement in and of itself. While recognising this achievement by companies who have had virtual meetings to date, this broad latitude should not necessarily be extended to future virtual AGMs given experience and expertise is now available and preparation times are significantly greater.

Secondly, despite ongoing conjecture in corporate and legal circles about addressing complex and arcane legal meeting requirements, such as physical quorums, ASIC provided relatively clear and principled guidance on what it was looking for from online AGMs. This is they must, as close as is possible, mirror key elements of an ‘in-person’ AGM, in summary being:

  • Ability to watch/listen
  • Ask questions
  • Vote

And with these simple and clear principals, ASIC provided an open field for companies to innovate – making best use of amazing emerging technologies and/or simple low cost solutions to best serve their particular shareholder bases. Indeed to demonstrate this, in the space of two hours, a couple of non-technically minded FIRST Advisers’ staff put together an example online AGM, that:

  • fully complied with ASIC’s requirements;
  • had double the technical capacity required for participation by holders in one of Australia’s largest share registers;
  • was more secure than ‘full-service’ Virtual AGM platforms currently in the market; and
  • was completely free, using trusted ‘off the shelf’ technologies.

The final major positive we witnessed was increased accessibility of virtual AGM’s to shareholders who may have struggled with the travel and logistics needed to attend an in-person meeting at a specific location. Alleviating this geographical constraint removes the second most significant barrier to shareholder AGM participation following ‘Not caring/Not relevant’.

The Negatives

While regulation and technology created an environment for a thriving virtual AGM calendar, for a number of reasons, the practical experience to date has been somewhat disappointing. This includes:

  • Extremely low shareholder attendance;
  • Conflicted and poor advice to companies on virtual AGM options;
  • High costs for what should be an ultra-low cost event, when compared to an in-person AGM
  • Challenges in adjusting to an online presentation environment; and
  • An absence of true innovation.

The foremost indicator of how underwhelming virtual AGM’s have been to date has been the stunningly low attendance levels by retail investors.

In my opinion, on attendance alone, the opportunity for the virtual AGM to provide all shareholders with equal access to listen to and question their board, and vote on resolutions, has been a failure. Retail shareholders are just not participating in sufficient numbers to indicate a preference for the virtual AGM experience currently being served up to them. This experience is common to both large caps and small caps and we need to better understand why.

AMP, for example, who benefits from an expansive retail shareholder base recorded attendance at its fully virtual AGM of less than 0.1% of its register. With their AGM occurring at the height of Australia’s national lock down, when their otherwise well engaged shareholders had little else to do but be at home and on the internet, (and with a well-resourced investor relations function) this low attendance figure would have been a disappointing outcome. At a lower point of the capitalisation spectrum, FIRST Advisers noted one mid-cap company had just 2 voting shareholders attend a well promoted fully virtual AGM.

Finally, we note that innovation levels have been extremely low. In recent months, this can almost entirely be attributed to the speed at which companies needed to act, limiting the opportunity to assess the breadth of virtual AGM options that are available. This has been compounded by share registries acting as 3rd party resellers of virtual AGM solutions and incentivised by the commissions they can earn. As a result most companies were offered a single platform that may not always have been the best fit for their particular needs. In some instances companies will, in the absence of good advice around alternatives, have paid fees starting at $10,000 for a virtual AGM solution built around a reskinned $95 Vimeo subscription, packaged with a chat and voting tool.

We hope that companies which will have more time to seek professional advice and genuinely innovative solutions prior to their next AGM might investigate bringing the virtual AGM process in house. Alternatively, new suppliers may enter the virtual AGM market, spurring the creation of better and cheaper offers. Indeed, one of the more technology focussed share registries is predicting virtual AGM costs will halve over the next 12 months. And for truly innovative companies, I suspect this cost reduction estimate is conservative.

In summary, companies should be commended for their efforts to deliver their AGMs in the most challenging of circumstances. And while an explanation for low participation and innovation could be the speed at which the first wave of virtual AGMs was deployed, this ignores the availability of technological alternatives and the ease and rapidity with which live video streaming technologies, such as Zoom, Google Meets and Microsoft Teams have been adopted. It also ignores the way conflicted and unhelpful recommendations from share registries, acting as 3rd party resellers of a virtual AGM solution, have limited innovation. I suspect this will change.

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