Annual general madness: alternatives to the AGM?
With the advent of the internet and the development of webcasts and conference calls, are annual general meetings really relevant anymore? Or are they just rubber-stamping exercises, statutory anomalies that no longer play a leading role in investor communications?
Although investor communication has fundamentally changed since the AGM was the only real opportunity for investors to see the whites of management’s and directors’ eyes, many companies still view the AGM as a key communication tool.
Household-name firms like BP, for example, use their AGM as a chance to show off their brand and showcase the company. Nick Wayth, an IR manager with BP, says about 1,000 retail investors attend the company’s AGM, held at the ExCeL exhibition centre in London’s Docklands, one of the few venues that can hold such a large crowd. ‘We’ve been holding the AGM here for a few years now; it’s a good venue because it’s very flexible,’ says Wayth. ‘It’s basically just a space, which gives us a chance to brand it.’
One of BP’s biggest AGM challenges – and one shared by many companies – is that it has no idea until the day of the meeting how many people will turn up. If more people turn up than can be comfortably held in the main meeting space, BP uses an overspill area, complete with screens, so shareholders who don’t fit in the main area can still watch the proceedings. ‘That said, to encourage people to be present in the main auditorium we now activate the overspill area only if we really need to,’ Wayth adds.
BP ensures shareholders can learn as much as possible about its business at the AGM, with lots of stands set up to explain operations and management on hand to answer shareholder questions. ‘Institutional engagement usually happens before the AGM,’ says Wayth. ‘Most large shareholders send their votes electronically.’
The company also has representatives in other markets, including the US, charged with attending shareholder fairs to help engage the company with investors based in those markets.
Mine of information
Another company that uses its AGM as an important shareholder communication tool is Canada’s Agnico-Eagle Mines. IR associate Hazel Winchester says the company holds its AGM in conjunction with its first-quarter results conference call.
‘It’s an opportunity to provide an overview of our strategy and to discuss our first-quarter operating and financial results,’ she explains. ‘It is an important point of communication with retail investors, institutional shareholders and analysts. We have around 250 shareholders attending our AGM.’
Agnico-Eagle is a Canadian gold producer with operations in Canada, Finland, Mexico and the US. It has five new gold mines under construction. On the day of the AGM, says Winchester, ‘we have directors, senior management, head office and technical mine staff there to answer any questions shareholders may have. Our CEO gives a 20-minute presentation, with Q&A at the end. Sometimes we have many questions, sometimes none, sometimes a few.’
Winchester says that despite being a mining company, Agnico-Eagle does not find itself inundated with contentious questions at the AGM. ‘Most questions are project-related,’ she says, adding that the management team does not usually need extensive briefing prior to the AGM. ‘Our senior management team is constantly marketing and on the road attending institutional conferences, one-on-one meetings and retail lunch presentations,’ she explains. The company has around 30 percent of its shareholder base in Canada, around 50 percent in the US, and roughly 20 percent in Europe.
Unlike BP and Agnico-Eagle, the Singapore Exchange (SGX) tries to address retail shareholder concerns before its AGM. Joyce Fong, legal and governance general counsel and company secretary of SGX (itself a listed company), says the exchange holds a special investor relations day prior to the company’s AGM.
‘It’s almost like an AGM, but without an agenda and resolutions,’ she explains. ‘People have something to eat and come to the auditorium to listen to what is really an analyst presentation, telling them everything the company is doing.’
A key part of the day is the opportunity for retail shareholders to meet management and the board. ‘The board is independent except for two non-independents,’ Fong says. The exchange also provides entertainment, which ‘helps shareholders feel relaxed’.
‘At the meeting we get lots of shareholder questions dealing with the company and the general market,’ Fong adds. ‘We are asked how this or that company is regulated and we even get complaints from investors, which helps preserve the AGM as a forum for institutional shareholders.’
Further south, in Australia, the newly elected federal government is reviewing the role of the annual general meeting. The review will look at the conduct of the AGM, as well as AGM-related functions such as preselection and nomination of directors, advertising of elections, the provision of information about director candidates and the presentation of ballot papers and voting arrangements.
It’s possible there will be legislative changes as a result of the review, particularly concerning electronic proxy voting. Only the largest Australian companies currently make use of electronic proxy voting, and even then usually only for institutional shareholders.
‘One reason electronic proxy voting has not taken off in the Australian market is that many companies’ constitutions don’t provide for electronic lodging of voting instructions,’ says Ian Matheson, CEO of the Australasian Investor Relations Association. ‘While the Corporations Act provides for it, the law does not make it mandatory. Until recently, institutional investors have not called for it either, so there has been no real demand.’ It’s likely this problem will be addressed by Senator Nick Sherry’s inquiry into shareholder engagement and participation, which is expected to be tabled in the Australian parliament later this year.
Aside from regulatory issues, there are other obstacles that have to be removed before electronic proxy voting is more widely used, not only in Australia but also in several other jurisdictions in the Asia-Pacific region. In particular, there needs to be more coordination between the different stakeholders before electronic proxy voting becomes the norm among the world’s listed companies.
There are many parts to electronic proxy voting, such as distribution of notices of meeting and ballot papers, involving a number of different stakeholders – share registries, custodian banks and specialist electronic proxy voting companies, to name a few. Agreement and cooperation needs to happen between all stakeholders to facilitate more widespread use of electronic voting. Once it becomes more commonplace, the next step will be the introduction of real-time interactive voting by shareholders at AGMs.
The idea would be for shareholders to vote at the AGM, or while watching the AGM via webcast. Bruce Babcock, president of Broadridge Financial Solutions’ ICS International division, says it’s currently possible to offer this service at shareholder meetings, ‘but no one is doing it’.
This is because although Broadridge can validate shareholders who wish to vote during meetings, software has yet to be developed to allow votes to be collected and collated in real time. Broadridge is a market leader in the global provision of electronic proxy voting.
When the software exists to allow effective real-time voting at AGMs and other shareholder meetings, it will revolutionize the annual general meeting, perhaps reinstating it as a key communication tool not only for retail investors but for institutional shareholders as well.