Shareholders Silently Unhappy With Virtual AGMs

By Julius Masaba

Many shareholders have been attending annual general meetings (AGMs) physically. Personally, I have attended some, it’s quite an experience. You get to mingle with other shareholders, the wealthy and famous to the wealthy and unfamous. Of course, not forgetting the gift hampers and sumptuous meals. It’s always a mini vanity fair! 

You also get to hear members’ views on companies’ performance.  If you’re keen, you’ll get information that can be helpful to you. Shareholders also get the only opportunity to ask management key questions or showcase their financial analysis and business skills.

Now that companies amended clauses on meetings, physical AGMs are no more due to Covid-19. Last year, many had to vote for or against holding of purely virtual or hybrid AGMs going forward. The Uganda Securities Exchange (USE) also advised companies against physical meetings and Uganda High Court  is pushing government to amend the Companies Act on that basis.

My first virtual AGMs were bad! I can say I was (or we were) not prepared for this. Same for the organisers, and the reasons – technology adoption, absence of physical feel! No one ever knew it would come to that.

However, regulars at these AGMs were (and are) unhappy about it despite agreeing that going virtual was for the best. Stanbic was the first to do a virtual AGM. It used Lumi tool last year, and Vimeet for its recent AGM. Others use(d) different apps.

Often, virtual AGMs are a ‘talk to’ not participatory settings. Proxy forms and resolutions are often emailed before D-day and sent back. Who knows if a passed resolution was seconded or not. A lot is being missed.

One stock market participant opined that “The new normal is what it is. The virtual meetings are the new norm. I have attended virtual events and they are as effective in global sphere. What is key at AGMs is information flow.” But I told him physical presence helps pick up on the body language of the management. Member to member interaction is missing.

Another disliked the whole experience. He thinks the listed company AGMs are geared against minority shareholders participating. Another, from Baroda Capital Markets bluntantly said “Virtual AGMs are unreliable.”

A third, humourously said “Virtual board presentations are okay due to improvements in ‘rehearsed presentations, speech power and choreographed AGM letters’, something that gives the board power over the AGM environment.”

But was concerned that resolutions are past hastily. Agendas like on board remuneration are sailing through effortlessly, banks like Stanbic have 99% approval on all items on its agenda. Boards also have full control over information flow.

It’s like virtual AGMs are the worst thing to happen to minority shareholders, they can’t confront and overwhelm the board on dicey issues. A mere tap of the mute button and shareholders will be unable to know what another shareholder is asking about, coupled with board power to habitually cherry pick questions devastates AGM mood.

It is like the same philosophy of applying SOPs that Mr. Tibuhaburwa used against Mr. Kyagulanyi’s youth menace to nip the political noise in the bud! Listed companies’ boards are in bliss, a perfect time to pass anything.

Personally, I think AGMs should be hybrid (physical and online), atleast when Covid-19 subsides. Shareholders understand the situation we are in but they’re also of a view that at least 50 to 100 minority shareholders would attend physically in a well-spaced venue.

For now, purely online is okay. Blocking out dissent in such AGMs would be easier as a company could cite connectivity issues if someone raised prickly issues.

I suggest shareholders send questions to a third party like a set of journalists, who could ask them during the AGM for impartiality. The task is in sorting the questions. Another way is for a USE official to oversee the AGM and ask questions. But it’s tricky as some may call it regulatory overreach. So, it’s better that the show goes on.

Deferment could lead to uncertainty and lack of clarity for the next financial year. I also think the practice of e-voting by shareholders before or during the meeting takes or has already taken some sheen off AGMS. It would be better held after the meeting.

Finally, instead of companies hiding behind the phrase ‘cutting costs’, companies should at least send shopping vouchers and some ‘brown envelopes’ to their shareholders.

I know many minority shareholders are silently sorrowful over virtual AGMs and that the opportunity to interact with management is being missed. I thought perhaps writing this article would instead be helpful.

Julius is a regular at AGMs, an investment researcher and business consultant at https://consultmasaba.com/home/ 

Twitter: @juliussmasaba