The Covid-19 pandemic has disrupted many aspects of our professional and personal lives. The annual general meeting (AGM) season is no exception.
A historic AGM season
VP already hosted 160 virtual AGMs in 2021
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In this article, we look at how the global pandemic accelerated the digitisation of general meetings, and whether or not virtual general meetings will be a part of the “next normal”
While the pandemic has compelled the majority of companies to embrace some form of virtual AGM solution, Gustav Lantz, Product Owner, Investor Services at VP Securities, points out that signs of the digitisation of the AGM had been on the horizon for quite some time. “Already prior to the pandemic, there were several trends pushing AGMs in the direction of digitisation.”
Trend #1: Investors are becoming more engaged
According to Gustav Lantz, changes in investor demographics and mindset were prompting companies to look for more accessible AGM formats. “There was this trend of active ownership, where investors were getting more involved in the governance of the companies they invest in. This was also fuelled by a global trend of a boom in individual investors, where we see a larger number of smaller investors being quite active in the investment space. These investors are typically quite curious about how the companies they invest in are managed, and they look to have a more active role in those companies by attending shareholder meetings.”
Trend #2: Focus on sustainable solutions
Gustav Lantz also highlights the focus on sustainability and corporate social responsibility as trends driving AGM-digitisation. “Physical AGMs can involve a great deal of travel, which, depending on the method of transportation, can increase pollution. Then you have the use of paper at these meetings. So, already before the pandemic, many were focusing on a more sustainable method of holding AGMs.”
Trend #3: The pervasiveness of technology
Finally, the fact that digitisation has impacted virtually every aspect of our lives meant that it was only a matter of time before digital technology transformed the AGM. “Smartphone ownership is practically more prominent than toothbrush ownership,” Gustav Lantz says. “This would indicate that the public is used to using digital technology and is ready for a more digital approach to AGMs.”
Virtual AGMs slow to take off
Despite the prevailing trends pushing AGMs in the direction of a virtual solution, there was still widespread hesitancy over whether to adopt a full virtual AGM solution prior to the pandemic. For example, VP hosted only one virtual AGM in the whole of 2019. When the pandemic arrived in 2020, many companies weren’t in a position to go with a fully virtual solution. “The pandemic came to Europe in the early part of 2020,” explains Gustav Lantz. “The emergency legislation was being drafted and put into place as the companies were holding their meetings, so they didn’t have time to react. Many chose to use different physical formats – and many Danish companies simply asked their investors not to come.”
Then came 2021. Contrary to what many had hoped, most countries were still under pandemic-related restrictions that made physical meetings impossible. And experiences from 2020 had laid the groundwork for a fully virtual approach to the 2021 AGM season. “In 2021, we’ve had a massive spike. A lot of that has to do with expectations from issuers, but also from investors. Investors saw some of these meetings taking place in 2020, and it created an expectation that that should be the way going forward, at least during the pandemic,” Gustav Lantz says.
Many of these companies were trying a virtual AGM solution for the first time. And many of the pre-pandemic concerns about a digital approach still lingered.
Concern #1: How to manage participation in a virtual setting
“We had questions about how we should handle questions and voting,” relates Stine Felten, Executive Assistant to the CFO at Royal Unibrew. “We usually have between 300 and 650 shareholders attend our AGM. A handful make presentations and many have spent a great deal of time on them. So, we wondered how we would balance speaking time between the shareholders in a virtual environment.”
Concern #2: Tackling the transmission delay
For Jonas Guldborg Hansen, Head of Investor Relations and Communication at Royal Unibrew, the concerns primarily related to the technical aspects of running a virtual AGM. “I spoke a lot with VP about what they could offer to reduce any delay in the transmission. It was really important that we have as minimal a delay as possible.”
Concern #3: What if the technology fails?
With a physical AGM, you always have the opportunity to intervene if the technology doesn’t work as it should. Virtual AGMs are a different matter, as Karin Sønderbæk, Legal Director at Sydbank, pointed out. “I think our main concern was that you feel like the proceedings are a bit out of your hands. You can’t personally collect votes if something goes wrong. You’re dependent on the technology.”
A successful ‘VGM’ experience
Fortunately, everyone’s concerns proved to be unfounded. “The whole event exceeded my expectations,” Jonas Guldborg Hansen says. “We had no technical issues and the transmission delay wasn’t more than 20 seconds.” At Sydbank, Karin Sønderbæk had a similar experience. “It was fantastic. Everything was under control, the streaming service worked and there was a good atmosphere when we had input from the shareholders.”
Virtual format has its advantages
There were also definite advantages to a virtual approach. “You save a lot of the planning time and it’s also a more efficient approach to an AGM,” comments Jonas Guldborg Hansen. Karin Sønderbæk points out the virtual format is more inclusive. “We can have participants located across the country, and they don’t have to travel all the way to southern Jutland. So, all investors have the opportunity to attend and actively participate.”
Still lacking the personal touch
While all agree that there are advantages to the digital format, they also agree on the main disadvantage. “A lot of our shareholders look forward to the social aspect of our AGM,” Stine Felten says. “You don’t have the same contact and dialogue with them when you run the meeting virtually.” That’s not to say that those who did attend the virtual AGM were dissatisfied with the format. “We received really positive feedback,” Karin Sønderbæk says. “Several of the participants sent text messages where they thanked us for the opportunity to attend. So, they were quite satisfied.”
Technology may enable a more ‘sociable’ VGM
Gustav Lantz observed similar reactions across VP’s broader customer base, where the virtual format made it easier for institutional and international investors to attend. “One of the major advantages that we’ve noticed is that there has been a massive increase in accessibility. This format also made attendance easier for those with physical limitations and disabilities to still be active shareholders.”
As regards the main disadvantage, Gustav Lantz believes the perceived lack of intimacy might be addressed by future advances in technology. “In the Danish market, there’s a tradition of branding the AGM as a meet-and-greet event, and you lose some of that with a virtual format. However, we have seen that the companies that had experience with virtual meetings from 2020, were in a better position to handle the technology in 2021, so this disadvantage could even out with time and experience.”
Is the virtual AGM the way forward?
Looking ahead to 2022, as many countries are lifting pandemic restrictions, will there still be a place for the virtual AGM in a post-pandemic world? “It’s always difficult to look into the crystal ball,” Gustav Lantz says. “However, we do see some clear trends. Technology is constantly improving, and we believe that new technologies will come that will change how we run AGMs. While we’re not at a point where the fully virtual AGM will become the market standard, we do believe that the virtual format will appeal to certain types of organisational structures, such as those who don’t have any attending shareholders. But I think the market is really heading for a hybrid solution, which offers the best of both worlds.”
Karin Sønderbæk agrees. “We are therefore seriously considering making it possible in our articles of association to hold a digital AGM, so we have that option. I think we’re more open now to a hybrid format. We simply have to realise that this is the future. And now we’ve had the opportunity to have a trial run.”
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