The virtual reality of future AGMs

I read an interesting interview in IR Magazine recently which discussed the experiences and drivers behind the first virtual AGM in the UK. The company (Jimmy Choo), embraced the use of technology for their AGM to increase its investor access and engagement. They were supported by EQS Group - an international technology provider for digital investor relations – who delivered a live presentation and an additional teleconference, along with Lumi who were able to provide electronic proxy voting capabilities on the day – read the full article here.

In the interview, Ania Wotjus, director of EQS Group, highlighted some of the shortcomings of traditional AGMs from a listed company’s perspective, as well as for the owners of the company: their shareholders.

“Jimmy Choo was looking to increase investor access to its AGM, encouraging shareholder engagement and giving all investors the opportunity to participate regardless of location. In addition, it was looking at reducing the cost of setting up an AGM, including the potential cost savings with regard to hiring a venue and gathering all the board in one physical location. Jimmy Choo felt that fully digitizing the process would enable it to achieve this.”

The article also discussed the need for the virtual AGM to mirror all the requirements of a physical AGM, and stressed the need to keep the process simple and easy to follow for shareholders.

“To follow the meeting you need webcasting and teleconference facilities, which provide the presentation materials and facilitate a live Q&A session whereby shareholders can ask questions directly to the board. Alongside this you need an AGM mobile app to allow shareholders to submit questions and vote on the resolutions being put to the meeting.”

With cost savings being a cornerstone of many company’s strategic plans, Ania outlines the pro’s, con’s, and cost trade-offs of a virtual AGM. For example, a company will incur additional costs for webcasting and teleconferencing, however cost reductions are available through a smaller physical venue (or no venue), reduced print & mail and reduced travel costs by not needing to have the entire Board in the one location. Similarly, shareholders in different locations can attend without incurring travel costs which means they can have their say without incurring travel time. Jimmy Choo had more people attend their virtual AGM than previous in-person meetings, highlighting the benefits in engaging shareholders via a virtual AGM. There will remain a group of shareholders that, similar to the ever-decreasing numbers requiring a hard copy Annual Report, will resist change and prefer a physical meeting, however the increasing pervasiveness and sheer convenience of digital interaction will likely see an increasing number of shareholders choosing to engage with companies via digital means.

Based on my own Investor Relations experience and talking to shareholders, there are a number of additional benefits. These include, but not limited to, common questions can be easily identified by the company’s IR manager and prioritised for answering by the relevant Board member. A virtual AGM will also offer shareholders a degree of anonymity when asking questions of the Board by submitting their questions in real-time electronically rather than standing up in front of an audience of people.

From our own experiences this AGM season, we are recording considerably more shareholder proxies lodged online than via traditional paper-based methods, and view the move towards virtual AGMs in Australia and abroa as a logical step towards a digital future.

Locally the government is paving the way for more digital engagement by signalling its intentions to improve financial regulation by making it technology neutral early this year. This was outlined in the May 2016 Proposal Paper titled “Technology neutrality in distributing company meeting notices and materials” – read the Proposal Paper here – which acknowledges that “the current law does not reflect the changes in the way Australians engage with digital communications technologies and content.”

Whilst there remain some barriers to achieving a fully digital engagement model with shareholders, we are seeing encouraging green shoots through the introduction of virtual AGMs and new technologies. Corporate Australia is responding with a growing number of companies seeking to amend their Constitutions to reflect not only mandatory
EFT for dividend payments to Australian-based shareholders, but also that notices can be provided by electronic means to shareholders.

A brave new digital world in this space is evolving.

James Barrie, Director Business Development, Automic