The CEO is on mute: the rise and of virtual AGMs

Analysis: are shareholders missing out on more than just a free lunch and a chance to rant at the company's board?

We are now all experts on virtual meetings, but have you attended any virtual annual general meetings (AGMs)? Due to Covid-19 and the enactment of emergency legislation, companies like AIB, Dalata and Ryanair held virtual annual general meetings last year. As pandemic restrictions were extended, more and more companies have had to hold virtual AGMs.

The benefits of virtual business meetings also extend to AGMs: higher attendance, cost savings and greener thanks to the reduced travelling. Institutional shareholders, such as pension funds, have attended more AGMs, in much the same way as we've all found how we can attend more meetings when we don't have to travel. As large shareholders, institutional shareholders are key to holding management answerable to shareholders so going virtual has many benefits.

From RTÉ Radio 1's News At One, RTÉ Business editor Will Goodbody speaks to Ryanair's Michael O'Leary at the airline's 2020 virtual AGM

But virtual AGMs are not new. In 2000, Delaware was the first US state to enable virtual AGMs and was quickly followed by others. In 2015, luxury footwear company Jimmy Choo became the first London-listed company to hold a completely virtual AGM. But despite the legality in many jurisdictions, virtual AGMs did not take-off until the pandemic. So is this one of the permanent changes we can expect in a post-Covid world? Or are there reasons the virtual AGM did not prosper?

The AGM of a company is a legally required meeting of the shareholders where certain statutory required business is undertaken, such as approving the accounts and dividend. But the AGM is more than just a technicality; it is a key connection point between shareholders and management. Especially for the smaller shareholder, the AGM is often the only opportunity to put questions to the board and management.

After the financial crash in 2008, the AGMs of Irish banks were key events for the smaller bank shareholder. It was an opportunity to vent their frustration, where banks boards and management had to listen and admit their errors. Imagine how much more pleasant the experience would have been for the banks if they could "mute" the vocal small shareholder with the press of a key. And they certainly could have avoided the eggs and shoes!

Protestors outside the AIB AGM in Dublin in 2019

Early research on the pandemic virtual AGMs is showing that the meetings are different. They are shorter: CRH and Smurfit recently wrapped up their AGMs in under 20 minutes. There can be obstacles on the advance submission of questions and less time is given to answering questions. With limited opportunity for a follow-up question, the "no comment" answer is increasingly common.

Is it possible that virtual AGMs are being used to reduce uncomfortable encounters and scrutiny? Perhaps. Shareholders don’t even get a virtual lunch or a coffee.

To support shareholder voice, widespread adoption of virtual AGMs requires more legal and regulatory provisions than included in emergency legislation. Companies must be required to employ effective technology, and support active engagement with shareholders before and during virtual AGMs, a complex concept difficult to draft and even more difficult for shareholders to enforce.

Given all of this, it is probably best that the enabling Irish emergency legislation lapses at the end of June. But let’s retain the virtual element to the AGM to secure the benefits it brings. However, a shareholder should also always be able to show up, eyeball and 'grill’ the management and boards. Surely those at the top can cope with a little discomfort one day a year?

To support shareholder voice, widespread adoption of virtual AGMs requires more legal and regulatory provisions than included in emergency legislation. Companies must be required to employ effective technology, and support active engagement with shareholders before and during virtual AGMs, a complex concept difficult to draft and even more difficult for shareholders to enforce.

Given all of this, it is probably best that the enabling Irish emergency legislation lapses at the end of June. But let’s retain the virtual element to the AGM to secure the benefits it brings. However, a shareholder should also always be able to show up, eyeball and 'grill’ the management and boards. Surely those at the top can cope with a little discomfort one day a year?

To support shareholder voice, widespread adoption of virtual AGMs requires more legal and regulatory provisions than included in emergency legislation. Companies must be required to employ effective technology, and support active engagement with shareholders before and during virtual AGMs, a complex concept difficult to draft and even more difficult for shareholders to enforce.

Given all of this, it is probably best that the enabling Irish emergency legislation lapses at the end of June. But let’s retain the virtual element to the AGM to secure the benefits it brings. However, a shareholder should also always be able to show up, eyeball and 'grill’ the management and boards. Surely those at the top can cope with a little discomfort one day a year?