Date: September 9, 2021
First published in Straits Times on 9 September 2021
When Covid-19 emerged in March 2020, the regulatory authorities here fast-tracked legislation in April to allow listed companies to hold their annual general meetings (AGMs) either virtually or in hybrid fashion.
Now, with more than a year’s worth of experience, it is perhaps timely to take stock, discuss the lessons learnt and highlight areas of possible improvement.
This is important as it looks like the virus is likely to affect our lives for years to come, making it difficult to predict when life will return to pre-Covid levels.
The most important lesson from the past 18 months is that if a return to full physical meetings is not possible for some time yet, then it should be compulsory for companies to conduct only hybrid meetings, which allow both online and physical attendance, and to do away with the fully online option.
The reason for this is that allowing companies to hold meetings fully online has many drawbacks which are unsatisfactory from a corporate governance viewpoint, based on the experience of the Securities Investors Association (Singapore) (Sias).
In fact, given that with an online meeting, shareholders can enjoy the convenience of not having to travel to remote locations and thus save time and costs, it would be reasonable to assume that attendance at virtual AGMs should be higher than before Covid-19.
Yet, Sias has found that this has not been the case – the numbers have actually fallen.
Why is attendance lower at online AGMs?
There could be many reasons for this, among them that some shareholders are not sufficiently technologically savvy. This could a limiting factor among older folk who might find it challenging to negotiate their way through the different meeting platforms that are available.
However, equally plausible is the absence of live question-and-answer (Q&A) sessions and voting which have made many virtual AGMs sterile affairs. Currently, shareholders have to submit questions in advance, which means that online meetings lack the spontaneity of face-to-face encounters.
Companies are now able to pick questions that they wish to answer, and this makes the actual meeting on the day itself a relatively boring, clinical event in which rehearsed replies are delivered that have already been vetted by public relations teams.
There is also no avenue for follow-up questions once the answers are articulated, so shareholders may end up with boilerplate responses that do not really address the issues contained in the original questions.
In this connection, Sias also notes that although a major provider of online AGM services offers a “live Q&A” option on its platform, many companies have opted out of this feature even though there is no additional cost.
Clearly, a fully online meeting allows companies to avoid properly and meaningfully engaging their shareholders if difficult questions are anticipated.
There is therefore a real need to allow some shareholders to be physically present, particularly those who have a real need to clarify issues they may have.
In addition to hybrid meetings, “live” voting on resolutions should be made compulsory. This is because the present arrangement of submitting votes before AGMs means shareholders are being asked to agree or disagree with proposals before any questions they may have had have been answered.
Again, from a governance standpoint, this does not make sense and is something that has to be addressed.
Three questions on AGMs
This is not to say that overall corporate governance standards have slipped because of Covid-19. It is worth noting that the Singapore Governance and Transparency Index 2020 rose to an all-time high score of 67.9 points, compared with 59.3 in 2019.
Furthermore, Sias has found an increasing number of companies are replying to its “Three Questions” that focus on corporate governance, strategies and financials that its researchers send to hundreds of companies ahead of their AGMs.
For the 250 companies involved in this exercise between March 2020 and February this year, 72 per cent responded, a healthy proportion that suggests more companies are trying to raise their disclosure and engagement standards.
Moreover, many companies posted their answers on SGXNet with headlines like “Responses to Questions from Sias in relation to the AGM”.
However, as noted earlier, even as there are signs of improvement, it is important to recognise the limitations of a fully online AGM and take steps to address them. The fundamental rationale for these meetings is to give shareholders a once-a-year opportunity to meet their managements and question them on the status of their investments.
As it stands now, a fully online AGM does not allow this and the way forward, at least until fully physical meetings return, is to make the hybrid model with “live” voting mandatory.
- The writer is Mr David Gerald, Founder, President and CEO of the Securities Investors Association (Singapore)