31 October 2016 by Anthony Hilton
The surprise is that it has taken until 2016, says Anthony Hilton
It must be 10 years since Tom Bonham Carter, a corporate governance specialist, began to talk eloquently about the potential for companies holding their AGMs on the internet. He thought companies should use modern technology to broadcast their annual meetings over the internet in real time, and that secure two-way communication systems should be introduced so that shareholders could not only watch the proceedings of the meeting but submit questions and vote too.
He could see how it would boost attendance and engagement, bring companies and shareholders close together and make it easier for shareholders to hold management to account.
His bigger vision was seeing the AGM as the occasion when management presented its plans to shareholders for the next five years in general terms and, more specifically, for the following 12 months. Shareholders would then vote to agree, amend or reject the strategy; this endorsement would remove any doubt that shareholders understood where the company was heading.
Obviously things evolve, so the board would report on progress against its plans every year, outlining the milestones passed and targets missed, and getting further shareholder approval of any material changes that they thought necessary to stay on course. This would also be the occasion where, if the strategy was proving inappropriate, it should be publicly admitted as a prelude for unveiling a new plan that plots a different course.
Thus, any change of direction would be made explicit, rather than quietly slipped through by management without being noticed. In this way, shareholders would have the opportunity to understand the implications of any such shift and react accordingly – favourably or otherwise.
He was perhaps 10 years ahead of his time but the world is catching up in that some of this thinking comes through in the section of the governance code that deals with shareholder engagement.
There has been little adoption of technology until this year, when Jimmy Choo, a well-known but small company at the fashionable end of the ladies’ shoe trade, assisted by Equiniti, the share registration service, held the UK’s first online AGM. You can read more about that in the article ‘AGM innovation’, from the September issue of Governance and Compliance.
The company’s motives were straightforward and nowhere even close to the vision of Bonham Carter. As with many companies it was aware that only a few shareholders attended its AGM and it was looking for a way to get better value from an event that was costly in time and money, not just for the company but also for those who attended. The company therefore decided to experiment by broadcasting its normal AGM online to make it easy for shareholders to engage.
Equiniti has developed a template for other companies which may want to follow suit, covering everything from the need to make sure a digital meeting is allowed under the Articles of Association, and amending these if necessary, to deciding how web enabled the company wants the process to be.
Security is important as only registered shareholders can participate and vote. In the Jimmy Choo case, Equiniti devised a system where each shareholder was given a username and password together with a unique meeting ID which they used to get online access to the AGM app. These details were sent out in physical form along with the notification of the meeting and the proxy voting slips.
Once the shareholder was logged on, the system linked automatically to the shareholders’ register to check how many shares were held in that name and how many therefore were eligible to vote. Other links allowed the digital attendee to see the slides and other visual aids. In the same way the resolutions to be voted on appear on screen, the shareholder could register a vote against each item within the time allowed.
The online meeting still did not attract vast numbers of shareholders but it did bring in more than the physical meeting so it met its basic objective. We should surely not be surprised. Digital meetings take place in every other aspect of business and personal life. Lawyers, accountants and securities houses hold regular podcasts and webinars where their experts pronounce on the issues of the day and take questions from closed user groups. In many ways, the surprise is that it has taken until 2016 for an online AGM to happen.