Virtual AGMs leave shareholders wanting the real thing

    More needs to be done in order to avoid erosion of relationships between firms and shareholders, if this format is here to stay

    By RAE WEE

    The Business Times, 22 September 2020


    SINCE virtual annual general meetings (AGMs) became the new normal, companies and shareholders alike agree that the lack of "human touch" may not bode well for both parties in the long run.

    On Sept 4, amendments to the Covid-19 (Temporary Measures) Act were passed in Parliament, allowing alternative arrangements to hold virtual AGMs and shareholder meetings to continue until June 30 next year. This is regardless of whether Covid-19 restrictions are still in place by then.

    However, shareholders are worried that this may further alienate them from a company's board of directors and decrease transparency between the management and its shareholders.

    "To be able to pose questions on the spot, we can judge the response of the management in terms of words, tone and body language. This will give us a better idea of how things are with the company," said a 40-year-old trader who declined to give his name.

    Having shareholders send in their questions beforehand and responding to them via the Singapore Exchange (SGX) announcements page also gives companies more liberty to choose what they want to reveal.

    "Directors (can) draft a perfect answer to the shareholders so that they would be satisfied and share prices can continue to climb," said an investor who only wants to be known as Ron K.

    Takahashi Kenichi, executive chairman and chief executive of Japanese food and beverage brand operator Japan Foods, agreed that the virtual means of AGMs allows the board and the management to be "selective in their responses" and "avoid or ignore difficult or tricky questions".

    He added that virtual AGMs are "not interactive", and prevent shareholders from asking follow-up questions and being able to receive a response on the spot.

    With the relaxed quarterly reporting requirements, S Nallakaruppan, an investment specialist at Lim & Tan Securities, said that minority shareholders are already at the "losing end".

    Adding to that, the current "impersonal means of communication" with the management at AGMs causes information flow to stop as "there's no room for clarification", which would eventually affect investors' confidence in the respective companies, he added.

    But there are upsides to virtual AGMs, such as the increase in "efficiency and relevance" of the meetings as the board and management are "able to zoom in on pertinent questions", said Japan Foods' Mr Kenichi.

    While Japan Foods saw a 30 per cent decrease in attendance for its virtual AGM on Sept 9 this year as compared to last year's, Mr Kenichi "believes that those who (took) the trouble to attend despite the lack of interaction and post-AGM refreshments are shareholders and investors who are genuinely interested in the company".

    Additionally, Adrian Chan, vice-chairman of the Singapore Institute of Directors (SID), said that the "virtual format" does "push a lot more listed companies to publish these shareholder Q&As online ahead of the AGM", thus allowing "more existing and potential investors to gain access to these substantive discussions", which they would not have been able to in the past if they did not turn up for the AGMs.

    Still, more needs to be done in order to avoid the erosion of relationships between companies and shareholders, should virtual AGMs be here to stay.

    Lim & Tan Securities' Mr Nallakaruppan said he "strongly urges the authorities to make it a requirement for companies' managements to meet shareholders on a half-yearly basis" through live interactions via digital means.

    To prevent companies from "picking and choosing the questions they want to answer", investor Lee Kim Poh said that "questions need not be raised beforehand", and for AGMs to be conducted in a "seminar style" instead.

    SID's Mr Chan said that "if done well", the "potential of the hybrid AGM is vast and can far exceed the pre-Covid-19 format of mainly physical AGMs in terms of outreach".

    He added: "This requires us to stop thinking of improving the virtual format to merely match up to the physical format, but to free up our expectations by fully exploiting how digital meetings can make inroads into the areas of shareholder engagement, governance and transparency."