Benefits and costs of virtual AGMs

The annual general meeting (of shareholders) is an important forum in company life; shareholders can engage with the company directly, and the board of directors is duty-bound to provide an account. Typically, such engagement includes hearing reports about the company's performance (typically the outgoing financial year) and outlook; asking questions; and, importantly, making important decisions including, inter alia, the election of directors who will be charged with overseeing the company (making decisions and ensuring performance) until the next annual meeting.

Despite the importance of the annual meeting, attendances have been declining in recent years. For example, Tony Featherstone, a commentator with the Australian Institute of Company Directors, recently observed that attendances have declined by 25 per cent over the decade to 2015. Others have noticed similar declines. Reasons for declining attendances are many and varied. While the lack of time and the tyranny of distance are commonly cited, a perceived inability to influence the decision-making process is a big turn-off for many shareholders, especially those who perceive that voting has been stitched up before the meeting.

Some commentators have suggested that new approaches are needed if shareholders are to be re-engaged. One alternative that has garnered widespread interest is the 'virtual annual meeting' to replace the in-person meeting. Tony Featherston and Anthony Hilton have both argued the case recently. 

​Superficially, the concept of a virtual annual meeting sounds great. Shareholders who cannot attend the annual meeting in person can particpate via an electronic channel. They can listen to presentations, ask questions and vote—and they can do so without incurring the time and cost of travelling to attend in person. But does remote attendance constitute acceptable engagement? Shareholders attending virtual meetings often cannot 'see' or interact directly with other remote participants. Consequently, the balance of power can (and does) shift from its rightful place (the shareholders) to the head table (the board of directors). The casuality is debate.

The challenge for shareholders is to resolve whether the benefits of the virtual annual meeting outweigh the more traditional in-person meeting. Both formats have their strengths and weaknesses. Does the virtual meeting (a group of people sitting at remote locations with computers or tablets and collaboration software) enhance genuine participation (cf. attendance) as is claimed, or is the construct a thinly-veiled attempt by the board or management to assert control and constrain healthy debates at annual meetings?  And what of accountability? Where does that lie and, importantly, where should it lie? The answer is analogous to the quantity vs. quality debate.

The annual meeting is the sole opportunity for shareholders to hear from the board and to hold it accountable. Accountability rightly includes answering questions and responding to challenges from those to whom the account is being provided. Boards should not be exempt from such scrutiny. Caveat emptor.