How boards can reframe the AGM

Virtual annual general meetings (AGMs) were held in Singapore for the first time last year for most listed companies. Initial concerns of poor attendance were unwarranted as some AGMs registered higher attendance rates than past in-person events. Yet, shareholders had varied experiences at the virtual AGMs — and many found the experience wanting.

There are criticisms that virtual AGMs have been extremely efficient to the point of being clinical, allowing the board and management to communicate their messages without receiving immediate responses from the audience. The pre-submission of questions by shareholders also empowers companies to pick the ones they choose to answer. Further, responses to questions have been formal, measured, rehearsed and often delivered one-way with no avenue for follow-up questions.

Arguably, the lack of live interaction between the board and shareholders is a major drawback of virtual AGMs. It deprives shareholders the annual opportunity to pose tough questions to those tasked with looking after their investments and seek assurance that the company is on the right path. Proactive boards that are keen to engage also have to work harder to connect with the virtual audience. For those that choose to see the AGM as a compliance exercise and leverage the virtual format for an “easier” dialogue, it is a wasted opportunity to engage with shareholders robustly and openly, and through that, build trust and confidence.

This does not have to be the experience of virtual AGMs. Regardless of the mode of meeting, the purpose of an AGM has not changed. What if companies reframe their view of virtual AGMs to regard them as an innovative platform that offers upsides to shareholder outreach, instead of a temporary substitute for physical meetings?

Keep to the strategic intent

Reframing the AGM does not mean that the board should be caught up with too many new initiatives or the form it takes. Rather, boards need to remain focused on the messages that they want to communicate to shareholders as well as what shareholders would want to know. Whether it is a virtual or hybrid AGM, controlling the agenda and timing of proceedings must be a discipline. The typically shortened duration of virtual or hybrid AGMs will demand greater rigor from boards, as the audience is likely able to stay more focused within the shorter time span. This makes it all the more crucial for the board and management to deliver an impactful message about the company’s performance and outlook, and inspire confidence in the corporate strategy.

As companies shape their narrative for the AGM this year, they should consider the growing emphasis on environment, social and governance (ESG) concerns by stakeholders, partly driven by the COVID-19 pandemic. The need to communicate a broader performance narrative beyond the financials and demonstrate how the company is delivering and protecting value is not new, but companies vary in doing so effectively. Effective ESG communications offer a forward-looking perspective into how the company is building resilience and strengthening its competitive positioning. They are also clear on the parameters and metrics that are aligned with the materiality of the ESG concerns for the company, how these are integrated into the corporate strategy, and the outcomes.

This does not suggest that communicating financial performance takes a back seat; it is about telling a more complete story of the company’s strategy and performance. In fact, communications with shareholders should be done throughout the year via regular business updates. For example, the CEO or CFO presentation does not have to wait till the AGM. Companies that have active investor engagements and conference calls recognize this. Unfortunately, in some cases, the removal of quarterly reporting, which is no longer a requirement, has also partly sidelined investor relations. For those that are less active and rely on the AGM to connect with shareholders, consider resetting the engagement momentum. After all, technology enables the shareholder outreach to take place any time and in real time, if that is desired.

Substance over form

It has taken a pandemic for AGMs to be widely conducted virtually. However, the end of the pandemic need not spell an end to the use of virtual or hybrid modes of communication with shareholders on a regular basis. While regulatory amendments will be required for virtual AGMs to be a permanent feature in the future, perhaps what matters more than the AGM’s form is its substance and spirit — an open and transparent two-way dialogue on the company’s financial and nonfinancial performance for the recent past, present and future.