Sometimes, disruption is good. During the COVID pandemic four years ago, we realized that fully in-person annual general meetings (AGMs) may have been unnecessary. After all, investors are global and far fewer were showing up at AGMs anyway. Earlier in my career, I recall AGMs held in large hotel meeting rooms with buffet lunches following the official business of the meeting. Long lines of investors would queue up at the microphone to ask their questions, many of them retirees dependent on dividend income. Retail shareholders do not have the same access to management or Boards as large institutional shareholders, often making the AGM the only venue to ask questions. One of the most memorable AGMs of my career was Nortel almost 20 years ago, where I listened to several retirees question management after losing their savings in Nortel stock.
AGMs look very different today. They can be in person, virtual only, or hybrid. According to Lumi, a proxy voting platform provider, virtual meetings were the most popular in 2023 at 44%, while only 35% were hybrid and 21% were in person. These numbers may not be indicative of all AGMs, as they only represent those hosted on the Lumi platform and the statistics can vary widely by region.
For Canada, Institutional Shareholder Services (ISS) reported that 52% of S&P/TSX Composite companies held virtual-only meetings in 2023, despite shareholders’ preference for preserving the in-person format. While we don’t have numbers yet for the 2024 AGM season, we did see a shareholder proposal at Metro Inc. requesting an in-person meeting be held. This proposal passed with over 53% support and clearly reflects shareholder sentiment regarding the issue.
The (Potential) Advantages of Virtual AGMs
It is easy to see why many companies prefer to go the virtual route for their AGMs. It can be cost-effective if no meeting rooms need to be booked or food served; however, these costs are not excessive. The biggest cost difference is likely between a hybrid platform and a virtual-only one. A hybrid meeting is going to be more complicated from a technology standpoint, as many of us now know after working in hybrid environments.
A virtual-only meeting is easier for management and the Board to plan and organize. Proxyholders are much easier to guide in an online forum, as opposed to having shareholder activists in person at an AGM, which is becoming more common at larger companies that are campaign targets.
Theoretically, investors should benefit most from virtual meetings, given the sheer volume of AGMs at which we need to vote, and it certainly allows companies to reach a wider shareholder base. Virtual meetings allow investors to participate in many meetings during a condensed spring voting season, without the need to travel around the country. Despite this potential benefit, investors have experienced mixed results when joining virtual meetings. While they should be more inclusive events, they end up being overly scripted, perfunctory affairs with some lasting a mere 15 minutes.
The Very Real Disadvantages for Investors
Much of the criticism around virtual-only AGMs comes down to a lack of genuine dialogue between shareholders, management and Boards. The AGM is a once-per-year opportunity for shareholders, especially smaller shareholders, to hear directly from management and the Board, and ensure accountability for decisions made on their behalf. While this can be done online, it is a completely different experience when questions are submitted online without context, not accessible to all shareholders, and can be shortened, changed, or even ignored altogether if written. Questions in this format often receive boilerplate responses from management, while Board directors are shielded by their lack of visibility.
What used to be a more lively, interactive affair where you could see real human beings has become a robotic, faceless compliance exercise. In my view, this insulates Board directors and management teams even further from their shareholder base. We must remember that one of the main reasons for holding an AGM is to elect directors who act on investors’ behalf. With virtual meetings, it is nearly impossible for investors to even know if directors are present and hard to direct questions to them in the spirit of accountability. From my experience, virtual AGMs seem more akin to a quarterly earnings call with some formal business mixed in.
Hybrid is Ideal
I was lucky enough to be asked to participate in a working group during the COVID-19 pandemic that included issuers, investors and proxy service providers. The intent was to develop guidance at a time when companies had no choice but to hold virtual-only meetings. While we produced a full report on best practices, the objective of a virtual AGM should be to replicate the in-person experience as much as possible.
Issuers can also find guidance from the Canadian Securities Administrators (CSA) which encourages: “…reporting issuers to provide for an ease, level and quality of shareholder participation at a virtual meeting that is comparable to that which a shareholder could reasonably expect if they were attending an in-person meeting.”
While the above guidance should prove useful for issuers, investors clearly prefer an in-person option, based on the lacklustre experience of virtual-only meetings. My advice for issuers is to offer your shareholders a hybrid AGM experience. It represents the best of both worlds – virtual access for a wider group of investors together with an in-person experience to encourage dialogue and accountability for Board directors and management.
The AGM is the only formal opportunity for shareholders to hold Board directors to account. To prevent these important events from becoming a compliance exercise, we must all remember the original purpose of the AGM and stay true to that intent.
Jennifer Coulson is Vice President, ESG, Public Markets, at BCI.